Franklyn P. deMarco Jr. and 251 Dunbar Road (Sotheby’s)
The owner of the popular Palm Beach restaurant Ta-boo sold a house on the island for $12.4 million.
Franklyn P. deMarco Jr. sold the newly constructed 7,224-square-foot home at 251 Dunbar Road for $1,716 per square foot. The trust of Alexandra Hersey Hamm of Palm Beach bought the house, records show.
The property last sold for $5 million in May 2018, records show. The new home has five bedrooms and seven-and-a-half bathrooms, according to Realtor.com. It sits on 0.45 acres.
Betsy Fry with Sotheby’s International Realty – Palm Beach Brokerage represented the seller, while Linda A. Gary with Linda A. Gary Real Estate represented the buyer, according to Realtor.com.
The property features a full bar with dual wine coolers, two fireplaces, a large loggia and patio for inside and outside dining. It also includes a library with a fireplace, three-car garage, and a pool cabana with a fireplace, the listing shows.
DeMarco has owned the high-end American bistro Ta-boo on Worth Avenue since 1990. The restaurant has existed since the 1940s when it was a nightclub, and was visited by Frank Sinatra, John F. Kennedy and the Duke and Duchess of Windsor, according to Florida Weekly.
In June, Robb E. Turner, a private equity investor turned maple syrup magnate, and his wife, Lydia Turner, sold their lakefront Palm Beach estate for $71.85 million, marking the highest priced sale this year in the ritzy town.
Also last month, the Kennedy family’s former Palm Beach compound, where President John F. Kennedy worked on his 1961 inaugural address, sold for $70 million.
Bayside Marketplace’s owner wants to evict five tenants, including Hard Rock Cafe and Bubba Gump Shrimp Co., alleging unpaid rent amid the pandemic.
The downtown Miami outdoor mall’s New York-based landlord sued the two restaurants and three retailers recently in Miami-Dade Circuit Court to initiate the eviction process, alleging the tenants owe a total of $802,832 in rent. Attempts to collect past due rent were unsuccessful, according to the suits.
Bayside Marketplace, owned by Ashkenazy Acquisition Corp., has been one of the hardest hit shopping centers in South Florida since the coronavirus pandemic began. Heavily reliant on tourists, foot traffic at the mall has been slow since businesses were allowed to reopen in May, according to the Miami Herald.
Ashkenazy’s patience seems to have worn out with Hard Rock Cafe, Bubba Gump, U.S. Polo Assn., Express and Shoe Palace, according to the lawsuits. Attorneys and spokespersons for four tenants did not respond to requests for comment.
An Ashkenazy spokesperson said Bayside Marketplace has worked closely with tenants “through these unprecedented times to identify solutions based on individual business needs.”
“This includes helping more than 50 Bayside Marketplace tenants access additional public or private financing,” the spokesperson said. “The majority of tenants have worked with us to meet obligations that will sustain a vibrant business community at Bayside Marketplace. We will continue to do everything we can to accommodate tenants.”
The five tenants have not paid rent for the three months ending in June, the lawsuits state.
Bubba Gump, a chain seafood restaurant owned by hospitality company Landry’s, was among the first Bayside renters to receive a default notice in April. Ashkenazy affiliate Bayside Marketplace LLC alleges Bubba Gump owes roughly $107,280. The restaurant occupies a standalone space near the shopping center’s entrance and is required to pay $35,760 a month, according to its lease attached to the Bubba Gump lawsuit.
Jeff Cantwell, Landry’s executive vice president of development, said Bubba Gump has been in constant communication with Bayside Marketplace about the restaurant’s “uncontrollable loss of sales” and “the state and local government mandated closing” of the dining room. Cantwell noted that Bubba Gump has worked out amicable deals with other landlords and will defend itself against the eviction lawsuit.
“Here, the Bayside landlord mistakenly believes that they are above the pandemic and do not have to work with their tenants,” Cantwell said. “We believe the landlord’s position is unreasonable and have been unable to arrive at a financial compromise.”
Hard Rock, which is also located in a standalone space near Bayside’s private marina, has been at the mall the longest among the five tenants. It’s lease dates back to 1992, requiring the rock & roll themed-restaurant to pay $500,000 in base rent annually plus a percentage of its sales. The lawsuit against Hard Rock alleges the eatery owes $337,912.
The break down for the other three tenants is:
Shoe Palace, a San Jose, California-based sneaker retailer with a lease since 2017, allegedly owes $131,801.
Express, a Columbus, Ohio-based clothing retailer with a lease since 2013, allegedly owes $105,245.
U.S. Polo Assn., a Colfax, Louisiana-based clothing retailer with a lease since 2014, allegedly owes $120,594.
Ashkenazy owns the open-air shopping center, but leases the ground underneath it from the city of Miami for $1.5 million a year in rent. Ashkenazy had commenced a $27 million facelift at Bayside before the pandemic.
The mall recently added a ferris wheel attraction that has yet to open. Bayside is also the planned future site of Berkowitz Development Group’s Skyrise Miami observation tower.
Authentic Brands Group CEO Jamie Salter with Brooks Brothers, J.C. Penney, and Aeropostale stores (Getty)
Deep into a marathon set of high-pressure meetings to save bankrupt retailer Aeropostale from being chopped up and sold for parts, Jamie Salter thought some comic relief was in order.
Shaquille O’Neal (Getty)
The Authentic Brands Group founder and CEO pulled out his phone and called Shaquille O’Neal — his company’s second-largest individual investor — to crack wise with the attorneys and investment bankers who had spent days in a General Motors Building office putting together an 11th-hour, $350 million deal.
“He dialed up Shaq on Facetime and went around turning his phone to everyone in the room to joke around and relieve some of the tension,” James Doak of Miller Buckfire, the investment bank that Aeropostale tapped to navigate a bankruptcy sale, recalled of that summer night four years ago.
“Everyone just lost it,” he said.
As one of the busiest opportunistic investors of the retail apocalypse, Salter — who earned a reputation as a “dead-celebrity dealmaker” for buying the licensing rights to Marilyn Monroe, Elvis Presley and other famous figures — is redeploying a novel strategy he cooked up in 2016.
Simon Property Group CEO David Simon (Getty)
To make the Aeropostale deal work, he teamed up with Simon Property Group and General Growth Partners to invest in the struggling retailer, while cutting rents, to help keep about 400 of its stores open. The two landlords had been looking for a way to prevent the mall staple from falling into the hands of private equity firm Sycamore Partners, which had plans to liquidate the casual apparel brand.
Four years and many retail bankruptcies later, Salter and his landlord partners are at it again. After buying Nautica in 2018, Authentic Brands and Simon came back to the table earlier this year alongside Brookfield Property Partners — which acquired GGP in 2018 — to buy Forever 21 out of bankruptcy for $81 million.
The trio are now in talks to purchase J.C. Penney, while Authentic Brands and Simon also have their eyes on Brooks Brothers.
As the economic shutdown caused by the coronavirus pummels retailers, Salter and his partners have plenty of deals to consider. In some ways, though, it’s an odd coupling.
Salter’s 10 year-old firm is designed to make big profits off branding rights. The model is based on finding distressed retailers that, despite their troubles, have value locked in their brands that Salter can strip away and license off. And with companies like J. Crew, Neiman Marcus and Pier 1 filing for bankruptcy due to the pandemic, the list of possible acquisitions is growing bigger by the week.
But the existential threat to brick-and-mortar stores remains a huge concern for Simon and Brookfield, who have clear incentives to keep their malls packed with rent-paying tenants. To some, their partnership with Salter is a shotgun marriage.
“I would say they’re more partners of convenience or necessity than partners of love,” one attorney, who’s worked across the table from Authentic Brands, said on the condition of anonymity.
New playing fields
Salter, who declined to comment for this article, operates in a niche sector of the investment world that got a big push from private equity after the 2008 financial crisis.
Firms looking for an asset-light way to profit off retail quickly found that they could juice their returns by investing in the brands and letting someone else deal with the burdens of store operations.
Authentic Brands is now one of a small handful of companies that specialize in buying intellectual property rights and selling them off through licensing agreements and its largest investor is BlackRock. Salter told CNBC in early June that he’s once again on the hunt for opportunistic deals.
“My strategy is simple: buy low, sell high,” he said. “We make sure, if we get into retail, that [the company] has a purpose. If it doesn’t have a purpose, we find a purpose.”
The fallout from the pandemic presents a unique situation for Authentic Brands and other distress investors, as it propels the number of retailers filing for bankruptcy. At the same time, Satler’s got some deep-pocketed partners. Brookfield Asset Management, one of the world’s largest investment firms, has set aside $5 billion to invest in struggling retailers.
Brookfield Property Partners CEO Brian Kingston
Brian Kingston, CEO of Brookfield’s publicly traded real estate arm, told The Real Deal in May that the new retail strategy is consistent with the firm’s contrarian investment model.
“The $5 billion program is designed to allow us to make investments in what we see as very strong, high-growth businesses at a time when capital is scarce, and we think we’ll be able to generate high returns because we’ll be able to pick and choose,” he said.
“There are going to be winners that come out of this, and if we can invest in some of those, it’s good for us, and it’s good for them,” Kingston added.
But the future of retail is arguably less certain now that it’s ever been, certainly more so than in 2016 when the trio did the Aero deal or following the 2008 financial crisis when investors feasted on distressed opportunities.
Equity Group Investments founder Sam Zell (Getty)
“I don’t think there’s any comparison,” Equity Group Investments founder Sam Zell told Bloomberg News in May, referring to the level of uncertainty in the investment world compared to past crises. “I would say retail is probably going to take the biggest hit.”
Retail experts question how much upside there will be in backing struggling bricks-and-mortar stores this time around, considering the increased competition from online shopping and the new challenges of in-door shopping while practicing social distancing guidelines.
And as the pandemic keeps many stores shuttered, Simon and Brookfield are gearing up to invest in their tenants more heavily than they ever have before. But the two can’t buy up every bankrupt retailer in their malls and some observers say they should let stores fail instead of propping them up.
“It can’t work for all stores,” said Miller Buckfire’s Doak, who added that Simon and Brookfield “aren’t here to save stores in other people’s malls.”
Doak argued that any survivors in retail will also need to have “intellectual property that people give a darn about.”
Brand ambassador?
Salter, 57, grew up in Canada and started a snowboarding manufacturing company in 1992 that he took public in just two years.
He later co-founded Hilco Consumer Capital, the private equity arm of Hilco Trading, which specializes in liquidating retailers. It was there that he realized he could build a niche business focused on intellectual property rights, and he struck out on his own in 2010 with backing from private equity firm Leonard Green & Partners, followed by Lion Capital and General Atlantic.
The model relied on a network of big third-party operators that purchased the rights from the branding firms and put them to work. But in recent years some of those operators have consolidated, requiring Salter to tweak his model, according to observers.
“There are fewer places for people to go to find operating entities that could support the valuations these brand accumulators are looking to achieve in these deals,” said Andy Postal, a managing partner at the consumer-brands investment bank MMG Advisors.
Salter “had to be creative in getting involved in operating businesses simply because he didn’t have a lot of people to do that independently,” Postal added.
Doak noted that the playful move with Shaq in 2016, as random as it seemed, was characteristic of Salter’s way of doing business as well as his personality.
When it came to the Aeropostale deal, Salter originally came into the process with his former colleagues at Hilco. The idea was that Authentic Brands would buy the IP rights and Hilco would buy the merchandise and sell it off. But Aeropostale’s creditors and landlords, including Simon and GGP, wanted to keep as many of the 700-plus stores open and preserve some 6,000 jobs.
It’s not clear who first came up with the idea of the landlords teaming up with Authentic Brands, but there’s no shortage of people claiming they put the creative deal together.
“I think you could find four different people who say they suggested it,” said Doak.
What’s clear is that Salter’s group asked the investment banker for permission to speak with Simon and GGP, and they hammered out a unique deal in a high-pressure situation.
Authentic Brands bought the IP rights to Aeropostale as well as a 25 percent stake in the operation that ran the stores, with Simon and GGP owning the other 75 percent.
Simon later restructured its stake so that it owns a piece of Authentic Brands.
Bradford Sandler, who worked as an attorney for Aeropostale’s creditors, said he thought the partnership was such a good fit that it would be a model for retail bankruptcies going forward.
“I thought it was potentially a new paradigm for retail,” said Sandler, co-chair of the creditors’ committee at the law firm Pachulski Stang Ziehl & Jones. “You didn’t really see that happen right away but it finally started to click as the retail apocalypse progressed and retailers left and right were filing for bankruptcy.”
To those who have watched him action, Salter’s a shrewd dealmaker with a knack for unlocking value. But he’s also gained a reputation for making a big splash.
In 2018 he went toe-to-toe with shoe giant DSW in an auction to buy Nine West out of bankruptcy. Salter outbid one of the biggest names in shoes with a winning check of $340 million — about $140 million more than Authentic Brands’ original stalking-horse bid.
“From what I’ve seen, when he makes up his mind about something, he’ll overpay like it’s nobody’s business,” said the attorney who has worked across the table from Authentic Brands.
Differing properties
While Authentic Brands and its landlord partners remain aligned for now, conflicts of interest could quickly arise if the deals don’t go as planned.
Salter’s main line of business is getting the most value from his intellectual property rights, while Simon and Brookfield want tenants that will pay top rents in the long run. With many U.S. malls still shuttered and the country’s retail market in utter chaos, there’s common ground between both sides.
But if those partnerships start to go sideways and the stores fail to gain traction, Authentic Brands has strong rights that could allow the company to cancel its licensing agreements, according to retail experts.
If Salter feels the licensee isn’t maintaining the brand properly, he can terminate the contract and pull forward future payments owed under the deal, analysts at Moody’s Investor Service pointed out.
“With all the pressure these real estate guys are under, it becomes imperative … to figure out ways to keep these brands in their stores,” said MMG’s Postal.
“It’s become a very complicated and challenging space,” he noted.
The parent company of Quicken Loans and Rocket Mortgage is officially going public.
Rocket Companies filed for an initial public offering on Tuesday, Bloomberg reported. In initial filings, the company disclosed turning an annual profit for the last three years, and its offering size is currently listed as $100 million.
Rocket Companies reported earning $1.8 billion in revenue and $97.7 million in profits from the first three months of the year. During the same period last year, the company disclosed $727 million in revenue and a loss of $299 million.
The company plans to be listed on the New York Stock Exchange, and its ticker symbol will be RKT. Goldman Sachs, Morgan Stanley, Credit Suisse, JPMorgan Chase and the Royal Bank of Canada are handling the offering.
Billionaire Dan Gilbert, the firm’s founder, will control 79 percent of the votes of common stock. [Bloomberg] — Erin Hudson
The Keyes Company is partnering with EasyKnock, a sale-leaseback startup, to give its agents another tool to offer sellers.
“We have a low inventory and there is some hesitation for people to sell their home because they’re not sure they can buy another home,” said Mike Pappas, president and CEO of Keyes.
In June, EasyKnock announced it closed a $20 million Series B round to expand its product offerings and add staff. The capital raise was co-led by Blumberg Capital and QED Investors. More than 3,000 Keyes agents in Florida will have access to EasyKnock’s platform, which includes its Sell and Stay sale-leaseback program and MoveAbility, a non-lending bridge product.
Keyes is looking to offer clients the option to free up cash for their next purchase while staying in their homes during the pandemic, Pappas said. Fewer homes have hit the market in recent months throughout South Florida.
“Consumers are facing a lot of inertia due to uncertainty, and agents are looking for more ways to be diverse,” said EasyKnock CEO Jarred Kessler. “Extra tools have never been more important.”
The programs are available for single-family houses, townhouses and condos. With MoveAbility, an agent would sell the house within a year.
Kessler said it marks the first major partnership for the company in South Florida.
EasyKnock is one of a number of companies aimed at making home-buying more accessible. Others include Noah, a San Francisco-startup that issues cash loans in exchange for an ownership stake.
The amount of rent Burger King paid in June compared to May was a whopper. The fast-food chain forked over 100 percent of what it owed landlords last month, compared to 63 percent the month before. The same went for Dave & Buster’s, where the new motto could be “Eat, Drink, Play…and Pay!” as landlords for the chain also collected all of June rent compared to 67 percent in May.
As states have reopened for business, national chain retailers have steadily paid a higher percentage of the rent they owe. But landlords may see collections fall in July, given that many areas across the country have experienced a recent spike in Covid cases.
In June, national chain retailers paid 68 percent of their rent, according to a report from Datex Property Solutions. That was up from the 58 percent that chains paid in May, according to Datex, which surveyed 141 of the largest retail chain stores across the country. Landlords can thank the widespread reopenings, the federal government’s Paycheck Protection Program loans and rent relief agreements that landlords worked out with their tenants, Datex CEO Mark Sigal noted. The report does indicate which chains have received relief.
The news was not all good. Landlords with clothing stores, gyms and theaters as tenants have seen rent collections remain low. Very low.
JCPenny, which paid 20 percent of rent in May after having declared bankruptcy, did not pay any rent at its stores last month. Justice, Lane Bryant and Century 21 also did not make any payments. It was at least the second month in a row that all three clothing companies failed to make rent payments at their locations, according to Datex.
Those were the only four of the 141 retailers in the Datex report whose landlords did not collect any rent at their locations. Last month, that nonpayment number was at 18.
Other chains continue to suffer. LA Fitness paid just 4 percent, while AMC Theaters paid only 5 percent. AMC has suffered billions of dollars in losses as all of its 600 movie theaters in the U.S. — and 1,000 worldwide — have been closed during the crisis. Early last month, the company said it hoped to reopen by July, but that won’t be the case for its New York locations, and it remains unclear elsewhere given the recent surge of Covid cases.
But one retailer whose rent payments surged in June was Hallmark. It went from paying 21 percent in May to about 74 percent last month.
Supermarkets and drugstores have been among the very few bright spots in retail amid the months-long pandemic, along with some fast-food chains and takeout restaurants.
Hair salons, which for the most part had been shuttered, are beginning to make a comeback as customers rush to tame their quarantine quaffs. Great Clips boosted its rent payments to 84 percent in June from 66 percent in May, while Sport Clips went from making 67 percent of rent to about 78 percent last month. But one of the best known chains, Supercuts, has remained mired in nonpayment, with rent payments having been trimmed down to about 20 percent.
“A lot of that is obviously market-dependent,” Datex CEO Mark Sigal said. “Hair is definitely ground zero of how aggressive a given market is in terms of opening up.”
In several cities reopenings have slowed, with the timeline for indoor dining pushed back — as was the case in New York City — or halted entirely, as with Miami and L.A. All of that could have a spillover effect on retail sales, experts say.
“The big sort of unknown, as you’ve already seen in some of these states that aggressively opened up, they’re now starting to dial back,” Sigal said. “So, it’ll be interesting to see if [retail] categories that saw some lift as more aggressive states were opening up see some challenges.”
Contact Sasha Jones at sasha.jones@therealdeal.com
The final week of June saw the average loan size hit $360,300, a record high in the history of MBA’s purchase index (iStock)
Homebuyers celebrated before the July 4 holiday weekend by applying for mortgages.
An index tracking applications to buy single-family homes increased 5 percent last week, seasonally adjusted, from the week prior.
The Mortgage Bankers Association metric, known as the purchase index, fell for the last two weeks in June.
Joel Kan, MBA’s executive at the helm of industry forecasting, called last week’s rebound a “recovery,” noting that it was the highest level of purchase applications in nearly a month and volume was up 33 percent year over year.
“The average purchase loan size increased to $365,700 – also another high – as borrowers
contend with limited supply and higher home prices,” he said in a statement.
The final week of June saw the average loan size hit $360,300, a record high in the history of MBA’s purchase index, which has been measured weekly since 1990.
The 30-year fixed mortgage rate hit a new low of 3.26 percent, down from 3.29 percent in the last week of June. Jumbo rates dropped to 3.52 percent from 3.59 percent.
Refinancing activity also saw a bump. MBA’s index tracking refinance applications increased 0.4 percent in the first week of July compared to the week before. That’s a 111 percent year-over-year jump.
MBA’s overall index, which encompasses all applications and covers 75 percent of the residential mortgage market, rose 2.2 percent last week.
The movie theater chain is close to hammering out a restructuring deal that would save it from bankruptcy, according to the Wall Street Journal.
The deal involves bondholders providing a $200 million senior loan and exchanging their unsecured claims for second-lien debt at an undisclosed discount. Meanwhile, Silver Lake Group, a private equity firm that has a seat on AMC’s board, will move into a first-lien position with its $600 million in convertible bonds.
AMC’s senior lenders, a group that includes Apollo Global Management, submitted their own counterproposal. Their deal would see the lenders fork over an additional $200 million in senior debt, in addition to the $200 million from bondholders, and block Silver Lake’s exchange into a first-lien position. But AMC is close to rejecting that proposal, according to the Journal.
The financing deal comes after AMC theaters have been shuttered for months due to the coronavirus pandemic. The chain expects to reopen most of its 600 U.S. theaters by July 30. [WSJ] — Erin Hudson
The popular Waterway Cafe with its floating bar in Palm Beach Gardens sold for $12.5 million.
Lake Worth Creek Corp. led by Thomas Smith and Edith Stevenson of Delray Beach, sold the 8,762-square-foot restaurant property at 2300 PGA Boulevard for $1,426 per square foot, records show.
Worth River LLC, led by Scott and Jill Yates of Palm Beach Gardens purchased it.
The Waterway Cafe was built in 1986 by real estate developer Jefferson Vander Wolk, on the site of the former Waterway Marina on the Intracoastal Waterway, according to its website. It features a floating boat bar and has over 300 feet of dock space.
The property last sold for $1.2 million in 1985, records show. The site spans 3.05 acres.
There have been few South Florida restaurant property sales in light of the coronavirus pandemic that has led some eateries to close down and others to reduce staffing. This week, Miami-Dade County Mayor Carlos Gimenez again ordered restaurants to close their indoor dining rooms, effective Wednesday.
Brooks Brothers, which has 500 stores across the globe, filed for Chapter 11 bankruptcy protection Wednesday. The move had been expected as the 200-year-old clothing chain struggled first with a shift from a formal dress code in the workplace to a more casual one, and then ultimately the coronavirus.
Brooks Brothers will use the bankruptcy process to find a buyer for the business, the Wall Street Journal reported. The company has a $75 million debtor-in-possession loan from WHP Global, which gives the lender a senior lien on Brooks Brothers’ assets, according to the newspaper.
WHP Global is a brand-management firm backed by Oaktree Capital and BlackRock – two private equity firms that have large war chests to buy distressed companies in the wake of the virus pandemic.
Brooks also received a $20 million loan from inventory liquidator Gordon Brothers. The loan, however, is from Gordon’s financing arm – a separate division from the side that handles liquidations, according to the Journal.
Brooks Brothers listed assets and liabilities between $500 million and $1 billion.
The closely held company is owned by Italian businessman Claudio Del Vecchio, who bought the company in 2001 and oversaw an expansion from one international market to a presence in 70 countries today. The company has about 200 stores in North America and three U.S. factories. It warned employees in June that it could shut those factories down.
Potential suitors include the brand manager Authentic Brands Group, which is teaming up with Simon Property Group in an attempt to buy the retailer. [WSJ] — Rich Bockmann
Jeffrey Soffer with the Fontainebleau and Michael Dell with the Boca Raton Resort & Club
The Fontainebleau Miami Beach laid off more than 1,300 employees, marking the largest hotel layoff in the Miami area since the pandemic began. Michael Dell’s Boca Raton Resort & Club also laid off nearly 1,000 employees, state filings show.
Jeffrey Soffer’s 846-room resort, at 4441 Collins Avenue, had temporarily laid off 2,083 employees early during the pandemic, expecting to bring them back prior to September, according to a letter the hotel’s vice president of human resources wrote to the state. The resort brought back 774 employees after it reopened in June.
But the hotel recently provided 1,309 laid-off workers with a separation notice, citing the effects of ongoing restrictions on travel and large gatherings, as well as low occupancy.
“Restrictions on travel and tourism have continued much longer than anticipated. There have been continued, longer-than-anticipated prohibitions on large gatherings, and the hotel occupancy has remained low,” Silvia Pereda, vice president of human resources, wrote in the WARN notice.
Soffer’s Fontainebleau Development owns the Miami Beach resort. The company is seeking modifications to the loan documents for $975 million in commercial mortgage-backed securities debt backing the resort, which prompted it to go into special servicing. The hotel said it has been making payments throughout the pandemic.
In a separate WARN notice, Fontainebleau Development said it permanently laid off 306 of 572 temporarily laid off workers at the JW Marriott Miami Turnberry Resort & Spa at 19999 West Country Club Drive in Aventura.
The Boca Raton Resort & Club, owned by billionaire Michael Dell’s MSD Partners, laid off 995 employees. MSD Partners purchased the 1,047-room resort for $875 million from Blackstone in June 2019.
Notices filed in June reveal the Mandarin Oriental on Brickell Key laid off 180 employees and PGA National Resort and Spa in Palm Beach Gardens laid off 348 employees.
Compass is launching an AI-powered tool to help homeowners visualize improvements and determine what upgrades to make, building on the firm’s program that fronts the cost of home renovations.
Compass Lens draws on hundreds of millions of listing photos and uses artificial intelligence to make recommendations to maximize the home’s value, the brokerage said.
Specifically, its data set includes scores of “before and after” pictures of renovated homes that sold. Compass engineers devised a room recognition system that matches a client’s home with similar, completed projects. The room recognition feature allows agents and clients to browse pictures of similar projects, analyze sales data and use that information to determine if a renovation will help their own prospects.
Compass said the photos are based on homes that were renovated through its Concierge program, which covers up front costs for staging and cosmetic improvements. Sellers repay the cost of repairs after the sale closes.
The brokerage billed the new tool as one that clients and agents can use safely amid the pandemic. The firm said Compass Lens can be used completely virtually, eliminating the need for an agent to walk through a home and advise on improvements. Compass said in a statement that the new tool allows “home sellers to prepare their home for the market without any in-person meetings or viewings.”
AI has been a focus of Compass engineers under chief technology officer Joseph Sirosh, the former CTO of AI at Microsoft, who joined the startup in 2018.
The firm, which has raised $1.5 billion in capital from investors, including SoftBank, has 17,000 agents across the U.S. Its sales volume last year topped $91.3 billion, up from $45.5 billion in 2018, according to real estate data firm RealTrends.
Compass temporarily scaled back its Concierge service (along with bridge loan advances) at the request of lending partners in March. Last month, the firm reinstated Concierge with some caveats. Agents will be suspended from the program if they have two or more clients who used Concierge but have not listed or paid back the funds in a timely manner.
Compass says 5,000 agents used Concierge last year on 11,000 listings valued at $8.5 billion. That accounted for 17.5 percent of the brokerages’ listings.
Ivy Realty CEO Anthony P. DiTommaso, Jr., and 650 Northeast 185th Street (Credit: Google Maps)
Ivy Realty snagged an 80,000-square-foot industrial freezer facility in north Miami-Dade County for $13.25 million.
Montvale, New Jersey-based Ivy Realty bought the property at 650 Northeast 185th Street in Miami for $165 per square foot, according to a press release. The seller, Best Freezer Holdings LLC, is tied to Clement Zanzuri of Miami.
The property is 100 percent occupied by True Grade Foods. The facility last sold for $2.7 million in 2007, records show. It was built in 1974.
CBRE’s Larry Genet, Tom O’Loughlin and Jake Zebede represented the buyer in the deal. Edward Redlich of ComReal Miami and Michael Weihl with Sirius Business Brokers represented the seller.
The warehouse sits on over 3 acres along the CSX Railroad. It has 28-foot high ceilings, 12 loading docks, one ramp and two rail doors. The warehouse can hold about 7,000 pallet positions, according to the release. It is off I-95 with close access to the Florida Turnpike and the Palmetto Expressway.
South Florida’s industrial market has remained strong despite the pandemic, which has caused other asset buyers to hold off on deals. Demand for e-commerce has skyrocketed, and institutional buyers are still targeting South Florida to buy warehouses for last-mile distribution sites.
In the second quarter, the industrial vacancy rate for Miami-Dade County was 5.3 percent, up from 4.1 percent in the second quarter of 2019, according to a recent report from Colliers International South Florida. Over 1.5 million square feet of industrial space was completed in the second quarter, according to the report.
Nooklyn CEO Moiz Malik and CORE CEO Shaun Osher (Nooklyn, Getty)
For weeks after the death of George Floyd at the hands of the police, Brooklyn agent Wileen Saint Louis watched as companies across corporate America spoke out against racial injustice and promised to take a hard look at their own practices.
Missing from the conversation was her own firm, Nooklyn, a rental-focused brokerage based in Bushwick.
“The silence of this company has spoken volumes to me and has been an utter disgrace,” Saint Louis wrote on June 19 in a company-wide Slack message and mass email.
“Are we that invisible? Is this movement not worth a message?”
Wileen Saint Louis
Shortly after, her Slack message was deleted, which she and several agents interviewed by The Real Deal viewed as an effort to silence her. Moiz Malik, Nooklyn’s CEO, acknowledged deleting the message but said he later reposted it in a channel he created called “#discussion.”
Saint Louis’ criticisms prompted other agents at Nooklyn to come forward with allegations that the firm treats minority agents unequally, ignores agents’ reports about discriminatory landlords and has failed to hire Black people in senior leadership roles — a well-documented issue in boardrooms across the country.
In response, Malik pledged that he would hire a Black agent to lead diversity and inclusion efforts, develop a new system for handling complaints and phase out the company’s logo — a stylized teepee — and take other steps.
The furor at Nooklyn is one of two recent examples of conflict at residential firms over racial issues brought to TRD’s attention by whistleblowers, echoing a wider pattern across the business world. The second occurred at Core Real Estate, a boutique sales brokerage owned by Related Companies, Midtown Equities and co-founder Shaun Osher.
Core conflicts
Last December, after a Black agent resigned from Core, two executives took to a group email thread to mock her.
The incident disturbed an employee, who expressed her concerns to management at the time. Then, in June, a tipster leaked the correspondence to TRD.
“I am finally reporting this because I feel we are all in a moment, where acts like this cannot be tolerated at any firm any longer, especially against minority groups,” said the anonymous sender.
In the exchange, COO Brittley Wise and the firm’s chief business development officer, Danielle Garofalo, swapped barbs about their departed colleague.
“Damn, we will have to find another agent that smokes weed with their hordes of cats and doesn’t sell real estate,” wrote Wise, who is married to Osher, the firm’s CEO.
“I will not have you speak about that kitty Bli$$ that way!!!!” Garofalo wrote back. (“Bli$$” is the name of the agent’s cat.)
Cacy Shamsid-Deen, then a receptionist at Core’s Brooklyn office, responded shortly after.
“Good evening Brittley and Danielle,” she wrote to the executives. “I found your recent correspondence between one another to be highly unprofessional and very distasteful. Quite honestly it makes me feel uncomfortable.”
When contacted by TRD in June, Shamsid-Deen said she felt the comments referenced racial stereotypes. (White people’s use of marijuana is often portrayed as recreational and Black people’s use as criminal, as many reports and studies have documented.)
“As a Black woman — and the agent was a Black woman — it was just saddening to see… that people still have microaggressions like that and beliefs like that they’re comfortable sharing with other people,” she said in an interview. “It was directed toward Black people specifically,” she added. “It wouldn’t have been said if it was a white woman.”
Microaggressions are commonplace verbal or behavioral actions that, irrespective of intention, convey prejudice or hostility towards marginalized groups. Last month, prominent Black real estate executives spoke out about the prevalence of such behavior within the industry.
“My values, when I choose to work at a company — [it] doesn’t include racism.”
Core disputed that its executives’ remarks had anything to do with race. The firm said Wise and Garofalo were referring to details they believed to be true about their former agent’s workplace behavior and personal life. Core acknowledged it had no “concrete proof” that the agent smoked marijuana, then offered three conflicting accounts in an effort to explain its executives’ comments. Eventually, Elizabeth Kee, who led the team the agent was on at Core, said in a statement that her team member often used a vape pen in the office, which Kee believed had been prescribed by a doctor. The agent was never approached about the issue before the group email was sent.
In fact, the former agent, Shalinthia Miles, only heard about Wise and Garofalo’s emails when contacted by TRD in June. She said the executives’ comments, and Core’s allegation, which she denied, didn’t surprise her.
“They’re calling my CBD treatment ‘smoking weed’ because I’m Black,” she said, referring to her prescription cannabidiol, which is not psychoactive.
Former Core agent Shalinthia Miles
“Do people REALLY believe that Shaun Osher would tolerate an agent smoking weed in the office? Of course not, it’s absurd. Core’s response is typical of what they do,” Miles added in a later text. A real estate agent since 2013, Miles joined Core last June after nearly six years at Stribling & Associates, according to her LinkedIn page.
Miles explained that she quit Core in December because she felt uncomfortable with how Core advised her to work with her clients, who are predominantly Black. She cited an incident in the weeks after she left the firm in which another Core broker, representing a buyer, aggressively pursued a Black seller whom Miles was representing with a lower-than-ask cash offer, even though the property had been taken off the market.
“My Core experience was defined by dollar-driven cronyism and clandestine racism,” Miles said.
She now works as an independent agent. Core called her account “unfair and false,” as did Kee.
Shamsid-Deen, the receptionist, left Core two months after the December email exchange. She remains bothered by the way the company responded to her complaint.
Shamsid-Deen said that Wise apologized and thanked her for calling out the exchange. However, Garofalo replied that Shamsid-Deen wasn’t aware of what prompted their emails about Miles, according to Shamsid-Deen, who added that a later phone call with her manager left her with the impression that Core wanted to ensure the incident would “not get them in trouble.”
“It kinda just seemed like ‘Are you over it?’ That’s the vibe I got,” she said. “It didn’t seem genuine.” Core denies that any conversation occurred.
“My values, when I choose to work at a company — [it] doesn’t include racism,” she said.
Core said it was not aware that the December emails had influenced Shamsid-Deen’s decision to resign, and pointed to a generic, four-sentence resignation letter in which she said she had a “very rewarding” experience.
The brokerage said it “prides itself on providing a welcoming atmosphere for every single one of our employees … Diversity and inclusion are foundational values for our team and we live by that every single day.”
Then, on the Monday before this story was published, Osher sent out an email blast to people in the real estate industry, decrying journalists who “pretend to care about truth,” and vowing that “if publications don’t stop acting recklessly they will feel it where it hurts most.”
Walk the walk
When the Black Lives Matter protests sparked a global conversation about racism and change, Saint Louis said she could not believe that Nooklyn, which brands itself as progressive and diverse, had not reached out to staff.
“It felt like you were on your own and these behaviors were going to be tolerated.”
“If there’s a carnival on Eastern Parkway for Labor Day, we know,” she said. “So why is it that this big world movement that’s going on, there’s nothing said about it whatsoever?”
Malik, the firm’s CEO, acknowledged the company should have spoken out. “I think that’s fair,” he said of Saint Louis’ comments. “It’s not enough to feel it, you have to say more.”
Two days after Saint Louis’ email, Malik wrote to agents and expressed regret about “not making public and company-wide statements.” He also vowed to lead a cultural shift at the firm.
Interviews with current and former agents and staff, as well as a review of internal emails from agents and management, show that many believe the lack of response was part of a pattern of neglecting to address racial disparities.
Jasmine Barros, who formerly worked in the finance department at Nooklyn and is Black, said she made multiple complaints about racist comments she heard at the office, but no action was taken.
“If three partners in the company are neglecting to act, everyone else sort of agrees to it,” she said. “It felt like you were on your own and these behaviors were going to be tolerated.”
Former Nooklyn staffer Jasmine Barros
Barros, who was let go in 2018, said Black agents were treated differently by management and not given training to help them thrive in the company.
“You would see the average Black agent making significantly less than the white agents,” she added, referring to their commission splits.
Malik acknowledged managers had “prioritized growth” over establishing processes for dealing with complaints — an issue they were now addressing.
Asked about pay inequity, he said he needed to drill down into numbers to get a fuller understanding, but said his “brain is telling me that’s not true” because many of the firm’s top agents were nonwhite.
Biased landlords
A Black agent who spoke on the condition of anonymity reported leaving Nooklyn last year because of how the firm treated minority agents — including how it handled commission splits — and how managers responded to allegations of landlord discrimination.
Last year, the New York City Commission on Human Rights, which investigates complaints and independently tests companies suspected of discrimination, received about 120 inquires related to racial discrimination in housing. The year before, it received 145.
The former agent claimed that some landlords actively seek out white renters, and by working with them, Nooklyn furthered “the displacement of brown and Black people.”
“Agents know that with certain buildings, certain landlords, you can’t bring Black people here,” the agent said.
Eric Harms, an agent at Nooklyn, said he routinely witnessed unequal treatment from landlords when he submitted applications from Black renters. In two recent cases, both applicants had high incomes and strong credit scores, he said, but the landlords reviewing their applications kept asking for more paperwork — in one instance, seven years’ of tax returns.
In contrast, Harms said he saw many white applicants with “terrible credit, terrible transaction history getting approved — no problem.”
Harms said some agents had even gone to the extent of lightening photos of Black applicants, or leaving the photograph out altogether, to give their files a better chance.
After Saint Louis’ message, several agents pushed for the brokerage to take a tougher stance with landlords.
“I’m sick of my Black clients having to jump through ridiculous hoops to get approved and when I mention this to management, they just shrug their shoulders,” wrote Jorge Vega. “This needs to be addressed.”
In response, Malik last week pledged in an email to agents that the company would “begin a review of landlord accounts that do not align with our values” and “establish a procedure for submitting housing discrimination-related complaints.”
Elaborating in an interview, Malik said he would “gladly get rid of every landlord where there is a suspected case of discrimination” because “I can’t sleep at night, knowing that.” But, he added, “that’s not been my personal responsibility until the last two weeks.” (Malik, who is a co-owner of the company, took over as CEO in May but has been chairman of the board since January, according to his LinkedIn profile. His predecessor, Noble Novitzki, did not respond to an email seeking comment.)
Asked about agents altering photos, Malik said it “deeply depresses me and it’s going to be a thing that I think about every day, and how to improve.”
“Not just lip service”
In the past month, several brokerage heads, including Corcoran Group CEO Pam Liebman, have also pledged to look inward.
“Today, you have my word that we are taking a microscope to this company,” Liebman told agents in an email in June. James Whelan, president of the Real Estate Board of New York, promised tangible change, “not just lip service.”
Many industry leaders made similar pledges last year, after a Newsday investigation revealed widespread racism at residential brokerages on Long Island.
Malik said when he was considering whether to speak out this time, he had been wary of appearing hypocritical.
“I read a lot of tweets and they said, ‘Okay, all these companies are releasing Black Lives Matter statements, show me a picture of your senior-level management,’” he said. “I took that to heart because we didn’t have a Black person in that [role], and that’s what I was trying to work on, just how do we build a better system for that?”
With the task laid out, it remains to be seen whether real estate executives will take the decisive action needed. And some Black real estate executives, while cautiously optimistic, are wary.
“We’ve all been a part of a task force,” said Jim Simmons, chief executive officer of Asland Capital Partners, during a panel discussion hosted by NYU Schack last month. “We’ve all had [diversity and inclusion] discussions about issues that are either systemic to a firm or to an industry … and change has yet to be forthcoming.”
Saint Louis said that while she was angry about how her email to Nooklyn was handled, and still questions why she was excluded from the company’s subsequent conversations about making change, she is happy the dialogue happened in the first place.
“This incident showed me exactly why unity is important,” she said. “We make a difference in numbers and with our voices.”
When TikTok inked a massive lease in Times Square in May, the deal was viewed as a beacon of hope for a bleak office market.
But this week, Secretary of State Mike Pompeo told Fox News that the U.S. is considering banning the video-sharing app over concerns that its Beijing-based parent, ByteDance, will share user data with the Chinese government.
“We are taking this very seriously. We are certainly looking at it,” Pompeo said. “With respect to Chinese apps on peoples’ cellphones, the United States will get this one right too.”
That raises questions about what will happen to ByteDance’s lease at the Durst Organization’s One Five One, formerly known as Four Times Square. The company agreed to take 232,000 square feet across seven floors of the tower as part of a 10-year deal. It was the largest new office lease signed in New York since the pandemic struck and it came soon after several tech companies, including Facebook and Twitter, had sent a shiver down the spines of some New York City office landlords by to let employees work from home even after the pandemic.
A spokesperson for Durst confirmed that the lease has been finalized but declined to comment further on Pompeo’s announcement. Representatives for TikTok and ByteDance didn’t return messages seeking more information.
In a statement Tuesday, ByteDance noted that “TikTok is led by an American CEO” and has “never provided user data to the Chinese government, nor would we do so if asked.”
TikTok has been taking steps to distance itself from China. It joined other social media companies on Tuesday in voicing concern over Hong Kong’s national security law, a measure imposed by China that criminalizes secession, subversion of state power, terrorism and collusion with foreign entities. TikTok also announced that it would cease operations in Hong Kong, the Associated Press reported.
It’s not clear what the decision will mean for another office lease inked by ByteDance last month: According to Bloomberg, the company agreed to take space in Times Square office tower in Hong Kong’s Causeway Bay. The tower’s owner, Wharf Holdings, didn’t immediately return a request for comment.
Throughout the coronavirus crisis, attorneys for retailers and other businesses have debated whether the pandemic qualifies as a force majeure — an event outside their control that can justify failure to pay rent.
Larry Hutcher, co-founder and managing partner of law firm Davidoff Hutcher & Citron, said barring an explicit clause that covers government action in its lease, a company in TikTok’s position would likely argue that unforeseen circumstances, “a frustration of purpose,” interfered with its agreement.
“It’s very similar to the type of situations we are facing now,” he said, referring to retailers looking to escape lease requirements. “It’s become a huge negotiation issue.”
Write to Kathryn Brenzel at kathryn@therealdeal.com
From left: Gaw Capital Partners’ Goodwin Gaw, Howard Lorber of New Valley Group, Oyo CEO Ritesh Agarwal, Soho House’s Ron Burkle, and Steven Witkoff of Witkoff Group (Getty)
More than 8,100 hotel businesses across the country received federal coronavirus assistance of $150,000 or more through the Paycheck Protection Program.
By number of jobs retained, California (86,000), Florida (55,000), New York (46,000), Texas (39,000) and Illinois (18,000) were the states where lodging businesses received the most PPP assistance from the Small Business Administration.
In total, 81 lodging borrowers received loans of $5 million or more, while another 1,200 received loans between $2 and 5 million.
In addition to supporting individual hospitality properties in an industry that has been decimated by the pandemic, PPP funds went to hotel owners, management companies and even startups like Softbank-backed Oyo Hotels. Oyo received a total of between $5.7 and $12 million through three entities registered at its U.S. headquarters in Dallas, for the purpose of retaining 561 jobs.
The private members club Soho House received as much as $22 million in PPP funds (or perhaps as little as $8.7 million, due to peculiarities of the data) for five locations in New York, Miami, Los Angeles, and Chicago, according to Bloomberg. The company also has properties around the world.
PPP recipients of $150,000 or more in the traveller accommodation industry also included 150 in the casino industry, 100 in the bed-and-breakfast sector, and another 500 that were categorized in “other” subsectors.
Reliance on the SBA data’s North American Industry Classification System industry code may lead to the omission of some hotel businesses. For example, the borrower entity for Sapir Corp.’s NoMo Soho hotel, which received a $2.9 million PPP loan, according to other disclosures, is categorized as an “Office Administrative Services” business in the data.
Some notable individual hotels that received loans of more than $5 million include:
CIM Group’s 391-key the Dominick at 246 Spring Street in Manhattan, formerly known as Trump Soho, through 246 Spring Street (NY), LLC (328 jobs retained).
Gaw Capital’s 338-key Standard High Line at 848 Washington Street in Manhattan, through GC SHL, LLC (468 jobs retained).
Standard High Line at 848 Washington Street in Manhattan
Steve Witkoff and Howard Lorber’s 190-key, 20-condo West Hollywood Edition at 9040 Sunset Boulevard in Los Angeles, through West Hollywood Hotel LLC (401 jobs retained).
Hotel companies that got a single PPP loan of more than $5 million include New York-based Denihan Hospitality Group (494 jobs) and Chicago-based Arbor Lodging Management (formerly NVN Hotels, 500 jobs).
West Hollywood Edition at 9040 Sunset Boulevard
Other companies got their PPP money in several pieces. Pasadena-based XLD Group, a subsidiary of China’s Sichuan Xinglida Group, received three loans totalling between $9 million and $20 million, to retain 1,098 jobs. New York-based EOS Investors received four loans totalling between $4.15 million and 9.35 million, to retain 576 jobs. Hotel operator MCR Hotels received between $20 million and $44 million through eight LLCs registered to its Dallas office, to retain a total of 2,342 jobs.
Kushner hired Gabriela Toledo to lead the company’s developments in South Florida.
Toledo was previously a project manager at Square Edge, leading the project planning, general contractor work and budget management for Paramount Miami Worldcenter, according to her bio.
At Kushner, she will be responsible for the company’s projects in Miami-Dade and Broward, beginning with three luxury residential towers at 1900 and 2000 Biscayne Boulevard in Miami. Last year, Kushner rolled out plans to build three major apartment projects in South Florida that will bring a total of 3,000 units at a cost topping $1 billion.
Carolina Rainer returned to Douglas Elliman after three years at Fortune International Group, where she led sales of Brickell Flatiron and 57 Ocean. In 2015, Rainer was Elliman’s director of sales for 1 Hotel & Homes South Beach. Now, she’ll be based out of Elliman’s Bay Harbor Islands office as a director of luxury sales. She’s licensed in Florida, New York and the Dominican Republic.
Moss Construction promoted Scott Moss, one of the company’s founders, to CEO. Bob Moss stepped down as CEO and will continue to serve as chairman and founder.
Marcus & Millichap promoted Scott Sandelin to senior vice president investments. He was previously first vice president of investments. Sandelin specializes in retail sales in Miami-Dade and nationwide.
Terry Lovell joined Bilzin Sumberg to lead the firm’s affordable housing and tax credit practice, as the demand for affordable housing grows. Lovell has represented developers such as Related Urban Development Group, The Gatehouse Group, The Vestcor Companies and Magellan Housing. Lovell previously worked for Stearns Weaver Miller for 29 years, according to his LinkedIn.
The coronavirus has upended pretty much everything, so it’s no surprise that nearly 45 percent of renters who were looking to buy a home say the pandemic has delayed or derailed those plans.
Younger would-be-buyers still have hope. The older ones? Not as much.
That’s according to a newly-released survey from Rentcafe — conducted at the end of May — which also found that nearly a quarter of renters said they doubt they will ever buy a home.
In addition to the economic uncertainty and job loss the pandemic has created, respondents also attributed the gloom to overall high home prices, according to the survey, which asked 7,000 renters about their housing plans before and after the virus hit.
The respondents’ outlook for the future differed by age group. About half of baby boomers said they weren’t interested in ever buying a home. Meanwhile, less than 15 percent of Gen Z and millennials said they would never buy a home.
Millennials, now in prime homebuying age, are the most optimistic of the bunch. About 66 percent of millennials said they would buy a home within the next five years, Rentcafe found.
And about 60 percent of Gen X respondents said they would make a home purchase in the next five years, while about half of Gen Z respondents said the same.
While the pandemic has made it more difficult to buy a home for many, buyers are returning to the market. Mortgage applications last week were up 33 percent year-over-year and the average purchase loan price rose to a weekly high of around $365,700, according to the Mortgage Bankers Association.
And while nearly a third of millennials and a quarter of Gen X renters planned to upgrade to a larger apartment, about 40 percent of Gen Z renters said they would downgrade to a smaller apartment. Just 25 percent of millennials and Gen Xers said the same.
A breakdown of the biggest bribes and what’s next in the historic scandal of LA City Council member Jose Huizar (Getty, DiMarzio | Kato Architecture, Department of City Planning, iStock)
The clock was ticking for a developer’s big downtown Los Angeles debut.
Carmel Partners was looking to get its planned mixed-use tower in LA’s growing Arts District across the finish line.
But with local residents and unions alarmed by the planned 35-story tower going up in an area consisting mostly of warehouses and two-story retail buildings, the project’s day before the City Council kept getting pushed back.
An executive at the San Francisco-based development firm had already bribed downtown Council member Jose Huizar with three $25,000 payments, while cultivating a relationship with the Planning and Land Use Management Committee chair over the past two years, according to a federal affidavit made public in June.
The executive — who has still not been identified by federal prosecutors or otherwise named — then doubled down and allegedly agreed to pay off Huizar with $50,000 more in September 2018. In an effort to seal the deal, the executive went one step further and offered to finance opposition research against ex-Huizar staffers who accused the lawmaker of sexual harassment, per the affidavit.
“There’s been plenty of corruption in LA development since the city’s beginning. But the previous cases I know of pale in comparison.”
Soon after, Huizar shepherded the Mateo Street project’s approval through the land use committee and the entire City Council.
The Carmel allegation is just one of several explosive charges after federal agents arrested Huizar on suspicion of racketeering. Huizar, prosecutors claim, used his perch as planning committee chair and the Council member of a booming downtown to operate a “criminal enterprise” that netted $1.5 million in bribes from real estate developers.
A rendering of 520 Mateo (Credit: Department of City Planning)
The charges are both startling in their scope and tawdry in their details.
Huizar tapped developers to address multiple sexual harassment claimants, the feds say, while also getting developers to pay for a steady stream of prostitutes, who Huizar purportedly referred to as “dessert.”
“There’s been plenty of corruption in LA development since the city’s beginning,” said Casey Maddren, president of the community group United Neighborhoods for Los Angeles. “But the previous cases I know of pale in comparison.”
Jonathan Mehta Stein, executive director of California Common Cause, echoed that sentiment.
“This is likely the largest corruption scandal in recent LA history,” he said.
A tangled web
The 116-page federal affidavit portrays Huizar as a figure confident in his power as a real estate kingmaker, asking that he be called “boss” and bragging that as planning committee chair his power over real estate exceeded Mayor Eric Garcetti.
The councilman also ran a district that was “undergoing a historic real estate development boom,” the prosecutor’s brief notes.
The suspected enterprise relied on the cooperation of former Department of Buildings official Ray Chan, LA City Hall lobbyists, and several liaisons to the development world. Real estate appraiser Justin Jangwoo Kim, development consultant George Chiang, and former Huizar staffer George Esparza have all reached plea deals with prosecutors regarding their involvement.
Huizar and the others named in the prosecutor’s brief either declined requests for comment or have not been reached by this publication since being implicated.
The enterprise began at least six years ago, according to the affidavit. That was when Huizar was running for reelection, while at the same facing a sexual harassment lawsuit from former aide Francine Godoy. Huizar had publicly acknowledged an extramarital affair with Godoy, but denied that he retaliated against her when she refused to provide him sexual favors.
The lawsuit settled before the election, which Huizar won in March 2015. The lawmaker had found the money to finance the settlement just in time, meaning that unlike a deal using taxpayer dollars, the terms did not have to be publicly disclosed.
According to federal investigators, a China-based development executive who matches the description of Shenzhen New World Group Chairman Wei Huang gave Huizar the $600,000 to settle Godoy’s lawsuit. In exchange, Huizar allegedly guaranteed that he could gain full approval for a 77-story downtown skyscraper the Chinese developer was planning.
The project did indeed pass through the City Council.
Jose and Richelle Huizar (Getty)
Besides Carmel and Shenzhen New World, the affidavit suggests that Huizar shook down several other developers to contribute toward a Political Action Committee geared to elect Huizar’s wife, Richelle Huizar, as his replacement on the City Council.
No other developers are explicitly named in the federal affidavit but the identities of two in addition to Carmel and Shenzhen New World can be induced.
One is Shenzhen Hazens Real Estate, which like Shenzhen New World is headquartered in the southeast Chinese metropolis — one of the first cities in China to open itself to global capital and a present day hub of commerce.
Shenzhen Hazens allegedly fronted Huizar and members of his staff $66,000 in consulting fees, casino chips, flights on private jets, luxury hotel stays, trips to Hong Kong and China, and prostitutes and escort services. In return, Huizar greenlighted an 80,000-square-foot project that included a 300-room hotel and hundreds of condo units.
The other developer implicated is 940 Hill LLC, a company formed by investors Dae Yong Lee, Jeok Suk Kim and Hyuk Lim to develop a 20-story tower on 940 South Hill Street in downtown LA. The LLC allegedly gave Huizar a $500,000 bribe in order for the project to pass Council chambers, overcoming the opposition from a local labor group.
“Councilman Huizar violated the public trust to a staggering degree,” said U.S. Attorney Nick Hanna at a press conference last month announcing Huizar’s arrest.
What lies ahead?
Vicki Podberesky
Huizar’s lawyer, Vicki Podberesky, has indicated in a statement to reporters that the council member will defend himself in court, as opposed to the media.
Huizar — who has been released from police custody on a $100,000 bond — remains on the City Council, though the City Controller’s office has suspended payments on his $214,000 annual salary with Controller Ron Galperin saying, “It is unacceptable for any Council member charged with public corruption to continue to be able to exercise the powers of his or her office.”
Controller Ron Galperin (Wikipedia Commons)
City officials, though, have stopped short of voting to kick Huizar out, content to let the clock run out as his November term in office expires. Those close to city hall say the Council is reluctant to vote on kicking out a longtime member who is not yet convicted of a crime.
Messages left with the ensnared developers went unreturned until June 30 when Carmel released a two-page statement.
The statement said that the unnamed executive who worked with Huizar was placed on administrative leave, as “there are a number of concerning allegations outlined in the complaint that require investigation.”
Carmel also claimed the affidavit is riddled with “numerous false and/or misleading conclusions, suppositions, innuendos, and opinions.”
The firm admits to handing over the first $75,000 in Political Action Committee money to Huizar, for example, but says it was a legal political donation “in support of two ballot measures addressing the Los Angeles County homelessness crisis.”
Carmel’s statement also makes it clear that the development firm intends to press on with the Mateo Street project, claiming a number of Arts District community groups support the complex.
Carmel and other developers had suspected some degree of foul play on the Planning Committee, but were still alarmed by the federal allegations, according to company representatives.
In a news release, U.S. Attorney Hanna maintained that Huizar “used the power of his office to approve or stall large building projects,” and called the alleged scheme a “money-making criminal enterprise that shaped the development landscape in Los Angeles.”
A rendering of 333 S. Figueroa Street
Shenzhen New World’s 77-story tower on Figueroa Street will be the tallest building west of the Mississippi River. And the 35-story Carmel project “egregiously” runs afoul of the city’s general plan for the low-rise Arts District, the project’s opponents have noted in City Council hearings.
Many hope Huizar’s arrest will foster a more open and fair system for the city to approve developers’ projects.
But few are holding their breath.
“The Huizar case is so far out of bounds I’m sure most Council members will take the position it’s an anomaly,” Maddren of United Neighborhoods said.
“Even if there’s no outright bribery, the existing system where developers, lobbyists and elected officials work behind closed doors to make planning decisions will certainly stay in place,” he argued. “Most Council members feel like the system is working fine.”
Bed Bath & Beyond will close 200 stores as the retailer’s sales plummeted 50 percent. (Getty)
Bed Bath & Beyond may have to rethink the ‘beyond’ part. The retailer said Wednesday that it will close 200 stores over the next two years.
Although online sales more than doubled during April and May, the company’s total sales fell by nearly half during its latest quarter. As a result, Bed Bath & Beyond will begin to permanently close a portion of its locations later this year, according to CNBC.
As of May 30, the company, which includes the chains Buybuy Baby, Christmas Tree Shops and Harmon Face Values, operated 1,478 stores, of which 955 are Bed Bath & Beyonds.
“We saw there were a number of stores dragging us down,” Chief Executive Mark Tritton told CNBC. “We will continue to look at the rest of our concept doors, now that we have established the data criteria.”
Bed Bath & Beyond is just the latest retailer to be forced into closures by the coronavirus pandemic.
The same day that Bed Bath & Beyond made its announcement, Brooks Brothers filed for Chapter 11 bankruptcy.
Bed Bath & Beyond was one of the many retailers that recently began to resume paying rent as stores reopened. In May, the retailer paid no rent in any of its locations. In June, it paid in almost 39 percent of them, according to the latest Datex Property Solutions report on national retail chains.
However, the trends may not be cause for celebration quite yet as some states have once again initiated shutdowns, further clouding the future for retailers. [CNBC] — Sasha Jones
