Hippo CEO Assaf Wand (Getty)

Home insurance startup Hippo is hoping to ride the coattails of rival Lemonade with an initial public offering next year.

The Palo Alto, California-based startup said Tuesday it raised $150 million, valuing the company at $1.5 billion, Bloomberg reported. Dragoneer and Ribbit Capital participated in the round, alongside Felicis Ventures and Iconiq Capital. Hippo intends to go public next year.

The round brings Hippo’s total funding to $359 million since 2015. Previous investors include homebuilder Lennar and Fifth Wall. The company was started by Israeli entrepreneurs, CEO Assaf Wand and Eyal Navon.

Most recently valued at $1 billion, Hippo is on track to generate $100 million in revenue next year. Wand said the goal is to have a “clear path to profitability” by 2021 when Hippo will be “ready to go public.”

Earlier this month, SoftBank-backed Lemonade saw its stock price triple on its first day of trading; the company’s valuation spiked to $3.8 billion from $2.1 billion.

Wand said thanks to low interest rates, business has been booming during Covid. “Because interest rates were so low, we see a surge of people that are refinancing their mortgage,” he said.  [Bloomberg] — E.B. Solomont

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Frank Del Rio and 272 Marinero Court (LPG Lifestyle Production Group)

The CEO of Norwegian Cruise Line Holdings sold his waterfront Cocoplum mansion for $7.15 million.

Frank Del Rio, president and CEO of the company that operates Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises, sold the five-bedroom, 8,031-square-foot home at 272 Marinero Court in Coral Gables, according to Realtor.com and property records. It traded for $890 per square foot.

The buyer is Amir Alon, who heads the transaction banking platform at Goldman Sachs, according to a source.

The Mediterranean-style estate was listed for $11.5 million in 2018, and more recently for nearly $8 million. Pietro Belmonte and Jennifer Goldstein of Douglas Elliman’s Eklund | Gomes team at Douglas Elliman represented both sides of the deal. They declined to comment.

The Coral Gables property includes a curved marble staircase, smart home features, staff quarters, a media room, courtyard with a heated pool and spa, summer kitchen, and a floating dock. It was designed by Ramon Pacheco and completed in 2001.

The deal closed on Monday.

Property records show Hilda Maria Bacardi, part of the famed Bacardi family, sold the house in 2007 to Del Rio’s Gator Res LLC for $7.5 million – $350,000 less than the current sale price.

Bacardi, the great, great-granddaughter of Bacardi founder Facundo Bacardí Massó, sold a separate Cocoplum property to singer Marc Anthony in 2018 for $19 million.

Del Rio works closely with Crescent Heights developer Russell Galbut in Galbut’s role as chairman of Miami-based Norwegian Cruise Line. NCL’s stock price has remained low since the pandemic began and led to the shutdown of cruise lines around the world.

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Adam Neumann and the home (Credit: Jackal Pan/Visual China Group via Getty Images and Zillow)

WeWork co-founder Adam Neumann is having a busy month. He’s putting up another property for sale — an 11-acre estate north of San Francisco.

The Corte Madera, California property is home to the “Guitar House” designed by architect Sim Van der Ryn. It’s set to hit the market for $27.5 million, around $6 million more than Neumann paid for it in 2018. The property hasn’t yet been listed on the MLS, according to Bloomberg.

Last week he and partner Jeffrey Dagowitz refinanced a development site in Chelsea with a $75 million loan from G4 Capital Partners. His family office also participated in a fundraising round for mobility startup GoTo Global.

Neumann has been reshuffling his real estate portfolio this year. He’s also in the middle of a lawsuit against WeWork backer SoftBank after the Japanese conglomerate pulled out a buyout deal that could have netted Neumann nearly $1 billion.

In March, Neumann sold property in the Hamptons for a half a million dollar loss.

He listed a triplex in Manhattan’s Gramercy Park neighborhood in February for $37.5 million. The same month he sold his stake in a San Jose commercial portfolio, according to Bloomberg.

Neuman’s Guitar House has seven bedrooms, a pool, home theater, racquetball court, gardens, and a greenhouse. The interiors have a brown and sand-colored color scheme. San Francisco is visible from the property. [Bloomberg] — Dennis Lynch

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Samark Jose Lopez Bello, 325 Leucadendra Drive (Credit: Google Maps)

When an alleged frontman for a narco trafficker needed a place to park his money in 2016, Samark Jose Lopez Bello chose a fitting home: a white palatial estate in Coral Gables with a striking resemblance to Tony Montana’s mansion in “Scarface.”

Now, more than four years later, after the federal government seized his assets, the government sold Lopez Bello’s 15,000-square-foot waterfront estate at 325 Leucadendra Drive for $12.25 million. 777 Florida Properties LLC, led by Steven Lempera, president of Future Environmental, purchased the home, records show.

Lopez Bello is a high-profile fugitive and is the alleged frontman for Tareck Zaidan El Aissami, a former vice president of Venezuela and alleged drug trafficker, according to the federal government. Lopez Bello allegedly provided assistance and financial support for the narco-trafficking activities committed by El Aissami.

Lopez Bello purchased the mansion in Coral Gables’ Gables Estates shortly after it was built in 2015 for $16.5 million, records show. It has nine bedrooms and nine-and-a-half baths on 1.3 acres. The home also features a pool overlooking the water, according to the listing. The mansion was previously built and owned by Miami homebuilder Sergio Pino.

The sale comes after the U.S. government seized the assets of Lopez Bello as part of a $318 million judgment against the Revolutionary Armed Forces of Colombia or FARC. Four U.S. contractors were kidnapped by FARC in Colombia in February 2003 and sued the paramilitary group.

The federal government alleges Lopez Bello’s associate, El Aissami, who was formerly Venezuela’s Minister of Interior and Justice, oversaw the shipment of narcotics from Venezuela on planes that left from a Venezuelan air base. He also allegedly oversaw or partially owned multiple shipments of over 1,000 kilograms of narcotics from Venezuela, according to the Treasury Department.

El Aissami also allegedly coordinated drug shipments to Los Zetas, a Mexican drug cartel, as well as provided protection to Colombian drug lord Daniel Barrera Barrera, according to the federal government.

Coral Gables’ Gables Estates and Cocoplum have become popular destinations for purported money laundering activity. In 2018, two luxury homes were seized in the area after government officials alleged that Venezuelan TV magnate Raúl Gorrín bribed Venezuelan officials to gain access to the country’s special fixed-currency exchange rate.

South Florida has been a haven for money laundering activity from South and Central America. The real estate industry has minimal required obligations to perform due diligence on buyers and sellers or when it comes to reporting suspicious activity.

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(Sarva by Sasha Maslov)

Knotel is reportedly trying to raise $100 million in funding in a round that would significantly lower its valuation, as the co-working firm grapples with plunging revenues and mass layoffs.

The company has been in talks with a European firm for the funding since the beginning of the year, according to Forbes. The new investment would be at terms that could cut Knotel’s current $1.6 billion valuation in half, the publication added, citing a source familiar with the matter.

Knotel co-founder and CEO Amol Sarva told the publication “there is still one more financing before the company is fully profitable and growing in a way that it is potentially a public company.” He declined to comment on the funding talks.

The company has a difficult path ahead as it contends with a weakened real estate market and a national shift toward remote work.

In March, the startup laid off or furloughed almost 200 employees around the world — slashing its workforce in half. In July, Sarva announced a 20 percent drop in revenue during the second quarter to $59 million, which he said had prompted the company “to make some really big changes.”

Last year, Knotel lost $223 million, according to financial records obtained by Business Insider. According to the documents, the company generated $74 million in first-quarter revenue, but had a net loss of $49 million in the same time period. (Knotel disputed the numbers.)

The company, founded in 2015 by Sarva and Edward Shenderovich, raised about $400 million in August from the likes of Kuwait-backed Wafra and Japan’s Mori Trust. Knotel is now facing lawsuits from several landlords over rent payments.

[Forbes] — Sylvia Varnham O’Regan

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Joe Biden (Getty, iStock)

Joe Biden went after one of the real estate industry’s favorite tax benefits Tuesday when he proposed funding a child- and elderly-care spending platform by closing off a loophole used by property investors.

The presumptive Democratic presidential nominee proposed eliminating 1031 “like-kind” exchanges for investors with annual incomes greater than $400,000, as part of his plan to finance $755 billion in government spending over the next 10 years on child care and care for the elderly.

But real-estate industry experts noted efforts to eliminate 1031 exchanges have been made before. The reason the tax benefit still stands, they said, is because lawmakers recognize its positive impact on the economy.

“They’ve talked about getting rid of 1031s for years, so I’m not surprised it would be in the Biden plan,” said Stuart Saft, head of the real estate department at law firm Holland & Knight. “Whenever Congress looked at these things, it’s been preserved.”

Saft stressed that eliminating the exchange at a time when the real estate industry is reeling from the coronavirus would be a major blow to the struggling economy.

“It would just pull the rug out from underneath a very huge part of the economy,” he said.

Biden said that his proposal, which would also limit investors’ ability to offset their income tax bills from real estate losses, would add millions of “shovel-ready” jobs to the economy – particularly for women and minorities.

“The way we pay for it is by rolling back unproductive tax cuts: some of the $2 trillion tax cut the president put through,” he said during a speech in Delaware Tuesday. “Closing loopholes. Unproductive tax cuts for high-income real estate investors while ensuring high-income earners pay their tax bills.”

Like-kind exchanges have been part of the U.S. Internal Revenue Code since 1921. They allow real estate investors to defer capital-gains taxes when they sell properties by directing the proceeds into new investments, usually within a few months after the sale.

But more than just deferring taxes, investors continually roll the gains into new properties, often in perpetuity – effectively eliminating those tax liabilities.

“In real estate, unlike in stocks and securities where you pay tax on your trading gains, you can just keep rolling over, so people do this for decades and decades,” Stephen Land of law firm Duval & Stachenfeld said in 2016. Michael Packman, a wealth-management advisor, described the tactic as “swap ’till you drop.” In 2016, he estimated that 1031 exchanges nationally exceed $100 billion in property sales annually.

The 1031s have been targeted before. Most recently, Republican House members had proposed eliminating the benefit in the lead-up to the 2017 tax reform bill – which President Donald Trump passed with the benefit intact.

Trump, as a prominent real estate investor, stands to benefit personally from 1031s. He is reportedly looking to sell his stake in a pair of office towers in Manhattan and San Francisco – properties he purchased after realizing a huge gain in 2005 on a Manhattan development site known as Lincoln Yards.

Yet despite efforts to eliminate 1031 exchanges, lobbyists for the real estate industry in Washington have been effective in preserving them.

Francis Greenburger, head of Time Equities, said that 1031 exchanges are “critical to the economic function of the real estate markets” and said efforts to cut them come from a lack of understanding about their economic benefits.

“Somebody who’s talking about eliminating these doesn’t fully comprehend why this is a good thing,” he said. “They’re just looking at it superficially.”

Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229.

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Jay Parker and Roger W. Ferguson, Jr., Chief Executive Officer of TIAA, with 801 Brickell Avenue (Credit: Google Maps)

Douglas Elliman was sued by its Brickell landlord for allegedly failing to pay rent during the coronavirus pandemic.

Elliman closed and vacated the 2,721-square-foot office at 801 Brickell Avenue in Miami as of May 31. It was one of three South Florida offices Elliman shuttered as a result of coronavirus.

Teachers Insurance and Annuity Association of America (TIAA), which owns the 28-story Brickell office building, sued Elliman for allegedly failing to pay rent in April, May and June, totaling $46,912. In a letter dated June 10, Carlton Fields attorney John Hart, representing TIAA, wrote that Elliman owed about $17,749 in unpaid rent, after applying the $29,163 security deposit.

The letter states that Elliman is still on the hook for the remainder of the unpaid May and June rent, plus all rent due going forward until the lease expires October 31, 2021.

In a statement, a spokesperson for Elliman said the brokerage “has been in regular communication with the landlord” and has reached a resolution. Hart, TIAA’s lawyer, did not immediately respond to a request for comment. Court records show the lawsuit, filed on Friday in Miami-Dade Circuit Court, is still open.

In April, developer Avra Jain said her only tenant that had not paid rent that month was Elliman, at 5555 Biscayne Boulevard in Miami.

During an earnings call in May for the brokerage’s parent company Vector Group, Elliman chairman Howard Lorber said the firm was seeking to consolidate offices and negotiate “rent reductions, deferrals or holidays” with landlords nationwide, as well as reduce staff and salaries.

The 801 Brickell lease began in October 2015 and encompasses suites L30, with 861 square feet; and 210, with 1,860 square feet, according to the lawsuit. Statewide, Elliman now has 17 offices.

Records show TIAA paid $80 million for the office building in 2002. Tenants include Gensler, co-working operator Spaces and Komodo Miami, a Groot Hospitality restaurant.

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Gap Inc. CEO Sonia Syngal and Brookfield Property Partners CEO Brian Kingston

Gap Inc. is firing back at landlord Brookfield Property Partners, a month after the latter sued the retailer for withholding rent.

Five of Gap’s chains — Gap, Athleta, Banana Republic, Old Navy, and Janie & Jack — sued Brookfield affiliates, claiming that its obligations to pay rent ended when government restrictions forced the company to close stores across the country, according to Crain’s Chicago Business.

In a complaint filed in Cook County Circuit Court, Gap argued that its leases with Brookfield should be modified or terminated because coronavirus-related restrictions made the core purpose of those leases “illegal, impossible, and impracticable.”

Gap also wants a refund of rent and expenses paid in advance for March 2020. The retailer alleged breach of contract, declaratory relief and unjust enrichment.

Gap operates 2,785 retail stores nationwide under its various brands and suspended rent payments in April for all of them. Mall owner Vestar was the first landlord to sue the company for unpaid rent in May, seeking $100,000 for rent at two California malls.

Brookfield sued Gap in Texas last month for $2 million in unpaid rent for stores in the state. Simon Property Group also sued Gap in June for $66 million in unpaid rent. Simon Property Group went on to sue Eddie Bauer and Brooks Brothers for unpaid rent last month.

While Gap is one of the most well-known companies to recently get into legal tiffs over rent, battles between other tenants and landlords are playing out across the country, with no signs of slowing. Many big chains, including Staples and LVMH Moët Hennessy Louis Vuitton, have skipped rent since the pandemic began. [Crain’s] — Dennis Lynch

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(iStock)

Mortgages in forbearance dropped to the lowest level in two months.

Home loans in forbearance made up 7.8 percent of servicers’ portfolios for the week ending July 12, according to figures released Monday by the Mortgage Bankers Association. That’s down from 8.18 percent for the week ending July 5 and from 8.39 percent for the week prior. About 3.9 million homeowners are now in forbearance plans.

Homeowners often request forbearance in times of hardship, when they can’t make interest payments on their mortgages. The forbearance rate rarely exceeded 1 percent before the coronavirus pandemic.

As more Americans returned to work, the pace of new forbearance requests has slowed, while the pace of exits from forbearance plans has quickened. Still, MBA Chief Economist Mike Fratantoni said he would be watching carefully for an uptick in forbearance requests as the end of expanded unemployment insurance looms and coronavirus cases surge nationwide.

Forbearance rates often vary by the kinds of institutions that keep the mortgages on their balance sheets.

Ginnie Mae’s share of loans in forbearance dropped to 10.26 percent in the week ending July 12, down 30 basis points from the week prior. Meanwhile, the forbearance share for loans originated by portfolio lenders or purchased by private labels jumped to 10.41 percent, down 52 basis points from the week prior.

Mortgages purchased by Fannie Mae and Freddie Mac, both government sponsored entities, saw forbearance rates drop for the fifth week in a row to 5.64 percent, down 43 basis points from the week prior.

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(iStock)

Landlords across the country have filed lawsuits seeking to overturn state and local eviction moratoriums, saying the measures jeopardize their businesses, discourage renters from paying what they owe and are unconstitutional.

The cases, filed in at least nine states, come as landlords grapple with their own mortgage obligations while having to negotiate payment plans with tenants hard hit by the coronavirus.

In New York, three landlords filed a federal lawsuit challenging the constitutionality of New York Gov. Andrew Cuomo’s eviction freeze. That lawsuit, by three landlords who own about 100 units in New York City suburbs, argued the eviction moratorium led even tenants who could afford rent to skip payments. A judge dismissed the suit late last month, ruling tenants will still have to pay the rent after the ban lifts.

But many other suits are pending, including in Arizona, Connecticut, Illinois and Kentucky, where landlords and landlord groups have sued states and governors in an effort to resume evictions.

In Kentucky, which does not have strong tenants rights laws, many landlords were surprised when Gov. Andy Beshear indicated he might extend the state’s ban on evictions — which took effect in March — until October. That’s according to Chris Wiest, who represents the Kentucky Apartment Association, which filed a federal suit to overturn the moratorium. The case argues that the freeze on evictions violates the Constitution because it impairs contracts. It cites a 180-year-old U.S. Supreme Court case that it claims struck down similar limits on evictions.

“My clients have worked out agreements with a lot of their tenants,” Wiest said. “The ones that were left were people who were abusing the system, they could be working full-time and you can’t evict them because they refuse to pay rent.”

In the early days of the pandemic, as nonessential businesses were shut down nationwide and millions of workers began losing their jobs and incomes, states began halting evictions. Many of those temporary measures were extended as the crisis wore on. Now, enhanced federal unemployment benefits are set to expire at the end of this month. Eviction bans intended to keep renters in their homes are expiring, too; eviction bans in nearly a dozen states will end next month if lawsuits don’t dismantle them first. Tenant advocates warn a flood of evictions will follow but landlords dispute that, saying the threat of eviction will lead tenants to pay rent, if they can.

Early this month, the Homeowners Association of Philadelphia — which represents residential investment and rental property owners and managers — sued the city. That followed a raft of tenant protection measures local officials passed, which included extending the eviction moratorium through August.

Blame the feds

Some multifamily owners blame the federal government for passing sweeping eviction protections for renters whose landlords have federally-backed mortgages. A provision in the CARES Act prohibits evictions for 12.3 million rental units, or more than a quarter of the 43.8 million U.S. rental units, the Urban Institute estimates.

A federal suit filed by two Texas apartment complex owners challenged those eviction protections.

The lawsuit contended that by not allowing evictions, Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson interfered with the “contract rights of owners…and their rights to due process and equal protection of the laws.”

Pierre Debbas, a real estate attorney in New York City, said his firm is helping landlords negotiate agreements with tenants over rent payments. While landlords in the state can once again file for evictions, proceedings are still on hold. Debbas, a partner at Romer Debbas, called the housing court reopening haphazard and confusing, and added it was preventing evictions from moving forward.

Some landlords who held off on evicting tenants during the worst of the pandemic are finding their own situations increasingly dire. While Debbas said, “you don’t want to look like you’re going to housing court and throwing out a tenant in the middle of a crisis,” he added that landlords with thin margins are left with few alternatives but to protect their investment.

Other landlords who are “suing the government can afford to survive but have said, ‘you can’t dictate how I operate my business, so enough’s enough.’”

Months into the crisis, an increasing number of landlords have pushed ahead to challenge the bans.

Landlord groups in Los Angeles and San Francisco have separately sued to toss out their local eviction bans. Two landlords have sued the California Judicial Council, the state court’s rule-making body, arguing that the state eviction suspension “immunizes” problem tenants from eviction. In a suit filed last month, the Los Angeles Apartment Association argued that the city’s eviction ban allows renters “to ignore their contractual obligations for the foreseeable future,” while landlords continue to rack up fees for water, power, trash and sewage.

The San Francisco Apartment Association alleges that the eviction moratorium violates “a basic term of any tenancy — rent in exchange for possession of property.”

The SFAA, whose members operate 65,000 rental units citywide, is a chapter of the state’s most prominent landlord group, the California Apartment Association. While CAA isn’t a party to either suit, a spokesperson said the group is involved through their San Francisco affiliate, but is on the sidelines for now. “We’re also monitoring the progress of the Los Angeles lawsuit and still might intervene,” the CAA spokesperson for CAA said.

Law firms that represent landlords may be further motivated to file challenges on their clients’ behalf, industry pros said. Attorneys at some of those firms — which Wiest called “eviction mills” — are out of work. Overturning the eviction moratoriums would restart their business, he said.

Leah Simon-Weisberg, legal director and tenant advocate at Alliance of Californians for Community Empowerment Institute, shared that sentiment. She said it is unusual to challenge eviction moratoriums in court because the measures are temporary, and may expire before the case is settled. With eviction bans in effect, “the landlord attorneys also have nothing to do,” she said. “This is their way to make money, and they have time to do it.”

Simon-Weisberg added she was confident the eviction ban would hold up in court.

“We’re not concerned [about the lawsuit] because frankly, the city attorneys took this process very seriously,” she said, “and really only passed legislation that they believed could withstand litigation.”

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Don Peebles

Developer Don Peebles founded his eponymous firm in 1983. Since then, the Peebles Corporation has built out a portfolio that totals $6 billion and spans more than 7 million square feet in Boston, Los Angeles, Miami, New York, Philadelphia, San Francisco, Washington, D.C., and Charlotte, North Carolina.

Peebles has long been outspoken about the need for real estate companies to address the lack of economic opportunity for minorities in the industry. He once served on the Real Estate Board of New York’s board of governors, but stepped down before the end of his two-year term, citing frustration that the group wasn’t doing enough.

Last year, he announced that his company is launching a $500 million fund to invest in minority and women developers, targeting multifamily and commercial projects ranging from $10 million to $70 million.

In an interview with The Real Deal this month, Peebles talked about the fund and how the industry missed its chance to lead the way on economic inclusivity. Developers and other commercial real estate players, he said, now have no choice but to change how they do business.

Last year you announced the launch of a $500 million fund for minority and women developers. How much has been raised so far? The typical fund, especially a new fund, I’ve been told, takes about 18 months, and we are about a year into this. It’s been a lengthy and arduous process, but we are making progress now. We are in due diligence with several institutional investors. The pandemic and the inability to meet people in person, and so forth, made it more difficult. But everybody’s adapting.

Do you have a time frame for having the platform up and running? I’m hopeful, by year end, we’ll be able to begin to deploy some capital to entrepreneurs who need it and who can produce good returns. Frankly, since the murder of George Floyd and the resulting protests, the issue of equal economic opportunity for African Americans has become more of a topic in the business community and has become one of the more current issues of focus. As a result of that, we’ve seen a significant increase in interest in our fund, in our entire platform, in terms of raising equity and providing equity to minority and women developers, as well as the projects that we develop.

What did you think of the real estate industry’s overall response to the Black Lives Matter movement and George Floyd’s death? I think that the industry is very late to the game. It’s almost too little, too late. While the industry over the last couple of decades has talked about diversity, they have approached it in generally philanthropic ways — helping the most neediest of Black people, as opposed to doing business with Black [firms], deploying capital to businesses and entrepreneurs who are talented but haven’t had fair access to capital.

[Investing in minority firms] is a very profitable endeavor, but our industry has looked at the Black community as one that is lesser than, and that’s unfortunate. In terms of providing real economic opportunities, real career opportunities, the New York commercial real estate industry has failed miserably, and the results are clear.

What are the results? People of color, when it comes to New York commercial real estate, are almost nonexistent. New York City is a market that is forgiving. People fail. They give their properties back to their lenders, and yet they live to fight another day constantly, and they get more institutional capital. You have an industry that has low barriers to entry with low educational barriers to entry, and people are building some of the biggest projects in the city with very limited educational or career backgrounds in the space, and the reason why is they get access to capital.

The people who deploy the capital, deploy it in a discriminatory manner. Whether that’s intentional or not is another story, but that result is the same. If you think about where private equity gets invested, it’s certainly not reflective of the population demographics of New York. Nor is it reflective of the investors of the capital in these funds because the biggest contributors to real estate private equity are public employee and labor union pension systems, whose memberships are heavily represented by minorities and women.

Can you describe what you mean by the discriminatory manner [in how capital is deployed]? I’ve been in the business for 35-plus years. So, when I see developers and owners give their properties back to their lenders or litigate with their lenders — or overpay and lose money for their projects — and they continue to get capital, I’ve often asked some of the people in the financial markets, “How’s that possible?” They explained to me that generally when a deal is underwritten in New York City, the investors and the lenders look at the deal first. When it comes to minority and women developers, they look at the sponsor first, with a microscopic eye, and then they look at the deal.

That’s a very different way of treatment, because there’s this overriding presumption, unfortunately, that somehow minorities and women are not as competent. Of course, that couldn’t be further from the truth.

You singled out New York City, but have you found real estate to be more diverse in the other markets you work in? If you look at Miami, the commercial real estate industry is more reflective of the population demographics. Latino developers are heavily in the Miami and South Florida marketplace. In fact, the largest condo developer in the state of Florida, Jorge Pérez, is a Latino American. David Martin and his father Pedro, again, are Latino Americans doing some of the most exciting projects in South Florida. The list goes on.

African Americans are underrepresented in Florida, and that is a consistent theme around the country. I think you have probably the best representation in Washington, D.C., and that really is because the government and the leaders of the city back in the 1980s made an affirmative push to create economic opportunities for Black businesses. And Washington, D.C., was a majority Black city.

For several years, you’ve called out the industry for its lack of diversity. What do you think should happen now? I think that the industry needs to provide economic and career opportunities to individuals and companies who are community-based and to create opportunities for other people to start new businesses. The industry just has been myopically focused on efficiency and profits and being incestuous with doing business with the same people over and over and over again. They haven’t felt the need to be inclusive, but now that’s changed.

I’ve been telling our industry for years that the business model of exclusion is not sustainable — that if the industry didn’t address these issues, if it didn’t address the diversity issue and affordable housing, those things would be imposed on the industry in ways it may not like. We’d be better suited to draw out the blueprint ourselves, and there wasn’t much interest in that. Unfortunately, now we’re going to see. These topics are not going away and the expectation of economic opportunity is not going to go away.

This interview has been edited for length and clarity.

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920 North Lake Way, Jeffrey Marcus of Marcus Cable, and Patrick Ryan of Press Ganey (Credit: Google Maps)

The couple who sold their Palm Beach estate to Bon Jovi paid $16 million for another waterfront home in the ritzy town.

Jeffrey and Nicola Marcus sold their Palm Beach estate to Bon Jovi for $43 million, and bought a house at 920 North Lake Way, records show.

Molly and Patrick Ryan, CEO of a healthcare consulting firm, sold the home, three years after buying it. The Ryans sold the 7,108-square-foot house for $2,250 per square foot, according to records.

Jeffrey Marcus is a cable television mogul who founded Marcus Cable Co., one of the largest privately owned cable companies, serving 1.25 million subscribers in 17 states, before he sold it to Microsoft co-founder Paul G. Allen in 1998, according to cablecenter.org. In 2004, Marcus formed New York-based private equity firm Crestview Partners, and serves as vice chairman.

Built in 1976, the home features a first-floor master suite and two first-floor guest rooms, along with five upstairs guest rooms. It also features a pool and cabana overlooking the lake. In total, the home has eight bedrooms and seven-and-a-half bathrooms.

The Ryans purchased the property in April 2017 for $12.9 million, records show.

Patrick Ryan joined Press Ganey as CEO in early 2012. South Bend, Indiana-based Press Ganey is a consulting and advisory firm to more than 41,000 healthcare facilities, according to its website.

Last week, Marcus sold the seven-bedroom, 10,232-square-foot mansion at 1075 North Ocean Boulevard to Bon Jovi for $43 million. Marcus paid $23.2 million for that Palm Beach home in 2014.

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Mortgage Bankers Association’s index tracking volume of mortgage applications to buy homes rose 2 percent in most recent survey. (iStock)

As the summer heats up, so too is the demand for home loans. 

An index tracking the volume of mortgage applications to buy homes increased 2 percent, seasonally adjusted, from the second week of July when it fell by 6 percent.

The so-called purchase index is a metric based on the Mortgage Bankers Association weekly survey, which encompasses 75 percent of the U.S. residential mortgage market. Joel Kan, who leads industry forecasting for MBA, said the purchase index was up 19 percent year-over-year. 

He said the “strong homebuyer demand” the index shows came “despite mixed results from the various rates.” 

The 30-year fixed mortgage rate increased 1 basis point to 3.20 percent, while jumbo rates dropped 2 basis points to 3.51 percent, according to the MBA’s survey. 

Kan noted, however, that “some creditworthy borrowers are being offered rates even below 3 percent.” Last Thursday, Freddie Mac said the average rate for a 30-year fixed-rate mortgage hit 2.98 percent, a new low in its 50 years of tracking. 

MBA also tracks weekly refinance applications, which jumped by 5 percent, seasonally adjusted, last week, marking a 122 percent year-over-year increase. 

MBA’s overall index, which measures all home-loan applications, increased by 4.1 percent, and refinancing applications accounted for 65 percent of the total applications. 

Write to Erin Hudson at ekh@therealdeal.com

The post There’s a scramble to refinance and buy new homes  appeared first on The Real Deal Miami.

(iStock)

After months of skipping out on rental obligations due to the coronavirus pandemic, retailers are getting closer to making their landlords whole.

Over 72 percent of national chain retailers paid their July rent as of mid-July, according to the latest report by Datex Property Solutions. That’s up from 62 percent just a month ago.

“We’re moving into this new normal,” Datex Property Solutions CEO Mark Sigal said. “It’s going to be mushy and uneven. I think landlords and tenants have gotten to the meeting of the mind.”

While most grocery stores and take out establishments have been fulfilling most of their obligations throughout the pandemic, sit-down restaurants and apparel stores have only recently started paying their bills as they were allowed to reopen across the country.

However, in July, the only two chains that paid 100 percent of rent seemingly came out of left field. After not paying any rent for months, Century 21 and Dave & Buster’s made their comeback.

Along with Century 21, other department stores made leaps in payments. J.C. Penney paid nearly 86 percent after making no payments last month and closing several of their stores this month. Stein Mart also paid nearly all of its rent after paying just 10 percent last month.

Claire’s Boutiques paid less than 3 percent of rents in June, but paid almost 85 percent in July, according to Datex. DSW Shoe Warehouse’s landlords saw rent collection increase from 16 percent to 96 percent.

While the majority of the 144 retailers included in the report paid more or the same amount of rent compared to last month, 36 chains saw a five percent or more decrease in rent payments.

Chuck E. Cheese stopped paying rent completely, likely due to its parent company, GNC, filing for bankruptcy last month. Victoria’s Secret similarly dropped from paying approximately 12 percent last month to just 2 percent this month, and Barnes & Noble went from paying 18 percent of rents to paying about 14 percent.

Still, fewer retailers are skipping payments completely. Last month 10 retailers failed to hand over even a dime of rent. This month, only three — Justice, Lane Bryant and Chuck E. Cheese — didn’t do so.

Sigal expects this report to be indicative of the next few months leading up to Q4, when many rent negotiations are set to expire.

“You could see a wave of renegotiations, depending on what the economy is looking like, and I suspect, in getting to that place, you’re going to see tenants work pretty darn hard to maintain the faith with the landlords,” Sigal said.

The report counts major chains as those that have a minimum gross monthly rent of $250,000 or lease 10 or more locations. It is based on verified collections from Datex Property Solutions’ portfolio of clients that report payment information from thousands of U.S. properties.

The report does not include rent relief negotiated between landlords and tenants. However, according to Sigal, this month’s report saw higher charges, meaning the numbers were not artificially inflated by negotiations made between landlords and their tenants.

Contact Sasha Jones at sasha.jones@therealdeal.com

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An illustration of David Lee

When protests in Los Angeles following George Floyd’s death at the hands of Minneapolis police officers turned to vandalism, Koreatown was left untouched.

The lack of disruption during the weekend after Floyd’s death was notable. Koreatown has historically been a flashpoint for racial tension including during the 1992 L.A. riots when properties were set ablaze amid searing images of store owners waving guns.

The calm seemed another sign of Koreatown’s post-riot bloom, a recovery driven by Jamison Properties’ David Lee and other local real estate developers.

Koreatown is the most densely populated neighborhood in L.A., “A happy mix of flashing neon lights, nondescript office buildings that house innovative restaurants and dark nightclubs, and eclectic shops in old Art Deco buildings,” declared a Curbed LA story last year.

But Koreatown’s rise faces uncertainty. The coronavirus pandemic may decrease demand for vertical, urban living just as Koreatown fills up with cranes and scaffolds for high-rises.

A data analysis by The Real Deal shows what the eye sees. In the 90005 Zip Code, a stretch that dips south and around Wilshire Boulevard in Koreatown, there is four times the number of apartment units that developers are constructing compared to the average L.A. County Zip Code.

Community activists fear Lee and other developers have built without regard to their mostly immigrant community. Real estate pros, meanwhile, fear the high-rises are no longer good business.

“Sure, there is a demand for housing, but the question is whether people can make the rents to cover the cost of building,” said Peter Tateishi, executive director, of California’s Association of General Contractors. “There is a concern, and we are not sure when this will catch up to us.”

Others say it is about to catch up.

“The current economic downturn is likely to be acutely felt in Koreatown,” said Eric Willett, a researcher at CBRE.

Jerry Brown, David Lee, and TOC

Koreatown is 2.9-square-miles with 118,000 people “sandwiched between downtown and Beverly Hills,” notes real estate attorney Doug Praw.

Korean immigrants entered the area in the late 1960s, and by 1980 Los Angeles County designated “Koreatown” as a neighborhood.

During the 1992 riots, some rioters did target Koreatown because Korean immigrants had clashed with Black residents. But the communities destroyed by the riots were in South L.A. like Compton and Watts. Koreatown was merely damaged.

“The property damage wasn’t as bad in Koreatown,” said Edward Chang, author of “Korean Americans: A Concise History” and ethnic studies professor at UC Riverside. “They were able to relatively quickly rebuild and recover.”

One post-riot fallout, Chang said, is Korean immigrants invested more in Koreatown itself. That included Lee, a physician, who opened Jamison Services in 1997.

The hard-charging Lee – who once at a community meeting threatened development foes that he would come back with an assault rifle – first developed office high-rises. But by the late 2000s recession Lee started moving away from just office buildings and poured money into multifamily properties.

Lee’s aggressiveness has stirred ambivalence among a Koreatown community composed of different generations of Korean immigrants, and also 50 percent Latinx.

“A lot of his projects don’t seem to be keeping equity and community at heart,” said Alexandra Suh, executive director at the Korean Immigrant Workers Alliance. “I think because it is a Korean-owned company, people seem to think, ‘Oh, it’s better to have one of our own.’”

Suh wonders if Lee, who came over to Los Angeles from Korea as a teenager, has contributed to making the neighborhood no longer affordable for first-generation immigrants.

The average Koreatown apartment building on the Multiple Listings Service is a two-bedroom leasing at $3,247 a month.

Grace Yoo, former president of the Korean American Coalition who is running for Herb Wesson’s soon to be vacated City Council seat, voiced a similar concern.

“At times it feels like Jamison Properties owns more than half the large buildings in Koreatown,” Yoo said. “As a major stakeholder in the area, I would hope that Jamison would be more attentive and receptive to the requests of the local residents.”

A Jamison spokesperson declined to make Lee or other company officials available for an interview, including any changes in the company’s strategy. Jamison’s latest move is a $31 million sale of the Maya, a 70,000-square-foot apartment building on Kingsley Avenue in the heart of Koreatown, to Omninet Capital.

Regardless of his community perception, Lee’s headfirst dive into apartments had, up to the pandemic, seemed like a smart business strategy.

It came as elected officials like former Gov. Jerry Brown began planning housing policy around public transportation. Koreatown, home to two public transit lines and the Wilshire Boulevard rapid transit bus, was seen as where L.A is headed – more walkable, and less greenhouse gas emissions.

The Wilshire Vermont apartments at 3183 Wilshire Boulevard

“Koreatown was a big part of L.A. moving away from all the single-family homes,” Suh said.

One change was construction starting on an $8.2 billion expansion of the Purple Line, which now goes from downtown to Koreatown, with expansion to put the line through Beverly Hills.

Another was the quiet passage of a 2016 state referendum (voted on during the election that Americans elected Donald Trump and Californians legalized marijuana) that greenlighted the Transit Oriented Communities program, or TOC.

“Pre-pandemic, there was a very intense focus on Transit Oriented Communities,” said Praw, a lawyer at Holland & Knight.

Under the program, developers who build within half-a-mile of a metro stop or rapid transit bus line enjoy a major relaxation on how much they can build.

How major? If a developer promises to set aside 20 percent of their units to individuals making less than $54,250 a year or a family of four making less than $77,500 a year – what the federal government and L.A. County presently define as low-income – they can build 50 percent more. Set aside 25 percent of units for low-income housing, and developers can build 80 percent more.

Towers, towers everywhere

At least one data point, apartments listed on the Multiple Listings Service, confirms an increasing number of Koreatown apartments are coming to market – three times more in the Koreatown-dominated zip codes of 90005, 90010 and 90020 compared to other residential neighborhoods like Baldwin Hills.

There are more complete facts on the amount of apartment units planned for construction, under construction, and built and ready to lease.

Approved city building permits from 2013 on, comparing Koreatown to zip codes with similar median income. (CLICK TO EXPAND)

The 90005 zip along Wilshire Boulevard has 4,791 units either being built, planned to be built, or put on the market in the zip code, according to mortgage broker Berkadia.

By comparison, the average L.A. County zip code has 1,375 apartment units in the pipeline.

The only zip with more units being built than 90005 is 90028, downtown’s South Park neighborhood where the biggest towers on the Pacific coast are being built, such as Greenland’s 1.679-unit Metropolis.

CBRE figures show another way of looking at the development boom: For every five apartment units in Koreatown there is one “under construction and likely to deliver in the next several years,” according to Willett of the commercial brokerage.

Willett noted a pandemic is not the best time for the “new developments to deliver.”

Many of the developing towers are Jamison’s, like a 510,000-square-feet complex by the Wilshire/Normandie Avenue Purple Line stop set to contain 428 residential units.

3545 Wilshire Boulevard and the proposed project for the space (Credit: Google Maps and BuzzBuzzHomes)

But other major league developers have started to get in on the action.

Hankey Capital is teaming with Jamison on a 25-story, 644-apartment building on Wilshire just east of the Wilshire and Vermont Avenue Purple Line.

Dallas development titan Trammell Crow is building office space and a new headquarters for the county’s Department of Mental Health one block north of Wilshire and Vermont avenues.

And Hollywood’s Harridge Development Group has planned a 35-story, 555-apartment tower a block east of Wilshire/Vermont.

Before coronavirus, Koreatown development was moving so fast that there were not enough construction workers, bragged David Lee’s son Garrett Lee in a Los Angeles Business Journal interview in September.

“There’s only so many construction workers, so many architects and engineers,” said Garrett Lee, the president of Jamison. “One of the challenges is being able to build a project on the schedule you want. We could build even more if there was a bigger labor pool out there.”

A New Residential Marketplace

Even before coronavirus hit California, there was one curious wrinkle in Koreatown’s success story.

Two planned hotel high-rises, including one by Jamison, were being changed at the 11th hour into apartments.

A third hotel by Century City developer Urban Commons is still planned the company says, but the company faces a slew of financial problems including a default on a Bank of America loan.

“Hotel development has pretty much come to a grinding halt,” admitted Alan Reay, president of hotel broker Atlas Hospitality Group. “Developers and operators are pivoting to apartments.”

The big question, of course, is how many apartments can sell and at what price.

A required number of units are set aside for affordable housing, but the vast majority of new units the last five to 10 years were priced to compete with higher-end neighborhoods like downtown and Hollywood, said Chang, the ethnic studies professor.

While Chang frets about where Koreatown is headed, industry representatives fear the coronavirus has disrupted the transition to wealthier renters.

L.A. Residential landlords like Neil Shekhter trumpet the coronavirus’s impact as helping the city long term, the idea being residents from New York and other dense cities will choose sprawl.

“The coronavirus created a whole new residential marketplace,” Shekhter said.

But that marketplace would benefit traditional single-family L.A. neighborhoods at Koreatown’s expense.

“Koreatown is a vertical neighborhood,” Praw said. “People are going into parking structures and traveling on an elevator, which is being second-guessed right now.”

One argument that Koreatown has not overbuilt is that whatever the neighborhood’s particulars there is still a region-wide housing shortage.

Don Favia, a Koreatown broker at Realty Investment Advisors, points to the state government’s Regional Housing Needs Assessment, which finds that, “Conservative estimates for Los Angeles alone run at 450,000 units of housing that need to be built by 2029.”

Community activists hope future projects include more affordable housing. But they voice a fear of oversaturation. One concern is parking. Despite proximity to public transportation, most residents and visitors of Koreatown drive.

“Parking is a topic of high emotions,” Suh, of the Worker’s Alliance said. “All the small malls and restaurants have gone to valet, and there’s no space to build more lots.”

Suh takes a long view of Koreatown’s identity as being a place of constant change, fluctuations that are extreme even by L.A. standards.

“Koreatown is one of the neighborhoods that has changed the most since the riots. It has not always been bad or good,” she said.

Where all sides agree – or at least want to agree upon – is that the pandemic will not throw the neighborhood’s next phase into too bad a direction.

“L.A. is still a net importer of people and Koreatown is a hot neighborhood,” Praw said. “Pandemic aside, I still believe in the Koreatown story.”

The post A boomtown for a bygone era: Koreatown developers face a reckoning appeared first on The Real Deal Miami.

Realogy CEO Ryan Schneider and SIRVA CEO Thomas Oberdorf

A judge has rejected Realogy’s bid to compel the would-be buyer of its relocation business, Cartus, to close the $400 million purchase. And now, the brokerage giant is pursuing a $30 million breakup fee for its trouble, according to Inman.

Realogy sued Madison Dearborn Partners and subsidiary SIRVA in an effort to finalize the deal on a contract the firms entered into late last year. Realogy accused SIRVA and Madison Dearborn of using the coronavirus as an excuse to back out.

But SIRVA and Madison Dearborn said it called off the sale out of fear Realogy was near insolvency.

On Tuesday, a chancery court judge in Delaware sided with the defendants, according to Inman. The judge ruled that Realogy’s decision to sue Madison Dearborn and SIRVA violated the terms of the parties’ purchase agreement.

“Realogy, not SIRVA, caused the conditions to fail,” the judge said, according to a Bloomberg report.

Realogy will continue to operate Cartus and pursue its breakup fee from Madison Dearborn and SIRVA. [Inman] — Erin Hudson

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Oceana Bal Harbour with Jack and Rita Barouh (Oceana Bal Harbour, the Barouhs via Europa Star)

A convicted tax evader and his wife snagged a condo at Oceana Bal Harbour for $6.7 million, a month after the couple sold their Golden Beach home for $7.2 million.

Jack and Rita Barouh bought the 3,992-square-foot unit 1401 at the south tower of the luxury development at 10201 Collins Avenue in Bal Harbour for $1,803 per square foot, records show. The development group, Consultatio Bal Harbour, sold the unit.

Jack Barouh, who owned Michele Watches, was sentenced to 10 months in prison in 2010 for tax evasion. Barouh admitted to hiding about $10 million in bank accounts in Switzerland and Hong Kong in the early 2000s, arguing that he was motivated to do so because of a “hide and hoard” behavior adopted by Holocaust survivors and their families, according to Reuters.

In June, Jack and Rita Barouh sold their three-bedroom, 5,373-square-foot house at 125 Ocean Boulevard in Golden Beach for $7.2 million, records show. The Barouhs had paid $5 million for the house in 2005.

Oceana Bal Harbour, completed in 2016, has 240 units and an estimated sellout of $1.3 billion. The luxury condo development was designed by Arquitectonica, with interiors designed by Piero Lissoni.

The 5.5-acre site was formerly the Bal Harbour Beach Club before Consultatio USA purchased it in 2012 for $220 million. A year later, the development group, led by Eduardo Costantini, secured a $332 million construction loan for the project from a group of lenders led by HSBC.

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Zillow CEO Rich Barton and IBM CEO Arvind Krishna (Getty)

IBM is escalating its legal battle with Zillow, filing a second lawsuit accusing the listings giant of infringing on patents to build its real estate search engine.

In a July 21 lawsuit, filed in federal court in Washington, IBM claimed the Seattle-based company infringed on five patents that improve searches by ranking results and simplifying content displays, among other things. Despite written notifications, Zillow has engaged in a “policy of willful blindness” and continues to use the technology, IBM alleges.

“Dozens of similar companies, including Amazon, Apple, Google, and Facebook, have agreed to cross licenses with IBM,” said the complaint. “Unfortunately, Zillow is not among them. Instead, Zillow has chosen to willfully infringe the five patents in this lawsuit without even considering licensing discussions.”

IBM and Zillow have been fighting over patent licensing deals for several years.

In September, the tech company sued Zillow in federal court in California, accusing it of building its portal with the unauthorized use of seven patented technologies. In that complaint, IBM said it tried for three years to reach a licensing deal with Zillow but wasn’t able to do so. In that case, IBM is seeking “royalties on the billions of dollars in revenue that Zillow has received based on their infringement of IBM’s patented technology.”

IBM, which reportedly invests more than $5 billion a year in research and development, has a history of suing tech companies, including Groupon and Twitter, for patent infringement. In March, it slapped Airbnb with a suit accusing the travel startup of using patents related to improved navigation using bookmarks and advertising in an interactive service.In a statement, Zillow said, “We are aware of the lawsuit filed in federal court. We believe the claims in the case are without merit and we intend to vigorously defend ourselves against the lawsuit.”

Since 2019, the company has bet heavily on home-buying as the future of its business. Last year, Zillow generated $2.7 billion in revenue, including $1.365 billion from its iBuying segment. However, the company lost $305.4 billion, up from $119.9 million in 2018. Zillow temporarily paused home-buying in March amid Covid’s uncertainty.

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Dr. Walter Okoroanyanwu, Angelo Bianco and Jim Carr

Amid the coronavirus pandemic, wellness services at developments have expanded to include an array of medical amenities, and gone far beyond luxury residential projects.

Crocker Partners, one of Florida’s biggest office landlords, even hired a doctor to fill a new role for the company: director of environmental health.

By hiring Dr. Walter Okoroanyanwu, Boca Raton-based Crocker Partners, an owner, operator and developer of office and mixed-use properties in the U.S., said it is making a long-term investment in medical and health expertise. The company said it hopes to keep its tenants and their employees at ease when they enter a Crocker Partners building. Between 20 percent and 70 percent of Crocker’s tenants are now showing up to work, said Angelo Bianco, managing partner at Crocker Partners.

Okoroanyanwu will focus on creating an environmental health, sustainability and wellness program that will be implemented across the firm’s 11 million-square-foot portfolio.

Bianco said the program will include changes that have been implemented over the past few months, including upgrading HVAC systems, moving deliveries to the curb rather than inside buildings, and changing high-touch hardware to copper alloy material, which is said to kill viruses such as Covid-19.

Crocker Partners isn’t the only real estate firm to turn to the medical field in recent months. Developers are incorporating telemedicine into their properties, adding medical space to projects, and hiring experts to guide them on operational and physical changes.

The doctor will see you in your home

Developer CC Homes, led by Armando Codina and Jim Carr, is partnering with Baptist Health South Florida to offer on-demand telemedicine to home buyers at CC Homes’ developments: Canarias at Downtown Doral in Doral and Maple Ridge in southwest Florida.

Carr said the idea for the partnership came to him before Covid. CC Homes tested it with buyers at Downtown Doral and got enough of a response to implement it at other projects. Baptist is the largest healthcare organization in the region, with 11 hospitals and 100 outpatient centers.

Homebuyers receive a complimentary Baptist Health digital health kit from TytoCare, which offers unlimited virtual urgent care visits, and an exam device that has an HD camera and microphone, infrared digital thermometer, and adapters to record the ears, throat, heart and lungs.

Telemedicine eliminates the time wasted in a doctor’s living room, and Carr said the digital health kit is a step up from FaceTiming with doctors.

CC Homes is covering the cost to homebuyers for a year, and Carr said most insurance companies accept the use of the kit.

About 250 homes remain for sale out of more than 500 houses and townhouses at Canarias, with prices ranging from the mid-$500,000s to more than $1.2 million. About 2,000 homes are left for sale at Maple Ridge out of 3,000, Carr said.

The medical trend was already underway, but the pandemic is driving increased demand for projects with health and wellness components, developers say.

Onsite medical centers

Last month, developer Dan Kodsi announced plans to double the size of a health and wellness center at Kodsi’s Legacy Hotel & Residences at Miami Worldcenter. The $60 million, 100,000-square-foot healthcare center is set to include doctors’ offices, an onsite lab, pharmacy, and a full diagnostic center and rooms outfitted with medical gas and ventilator capabilities.

About two years ago, Integra Investments completed Aventura ParkSquare, a mixed-use project with residences, office, senior living, and a medical center. Around the same time, Ritz-Carlton Residences Miami Beach offered condo buyers a yearlong membership to a medical concierge service led by South Beach Diet founder Dr. Arthur Agatston.

And Rieber Developments recently broke ground on 12|12 Aventura and Ivory 214, mixed-use projects with medical office space.

Chief Health Officer

At Crocker Partners, Okoroanyanwu will aim to be a sentinel of health and safety protocols, to ensure procedures are implemented, and to be prepared “for the next Covid,” Bianco said. Crocker also brought on the doctor to free up employees who have been focused on implementing new procedures in response to the pandemic.

Crocker Partners said it will share its findings and new protocols with the commercial real estate industry.

“We could not do any of this and just wait until the virus goes away — go back and lease our space up,” Bianco said. “I think it’s the lazy option, and it’s not going to allow us to lead and improve our environment to avoid and minimize future crises.”

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Tammy Jones

When Tammy Jones decided to launch her own business, she found a partner in her former client, the Manhattan development and investment firm JEMB Realty.

The two formed Basis Investment Group in 2009, and 11 years later, the company has closed roughly $4 billion in commercial real estate debt and structured equity across the U.S. Jones, the firm’s CEO and majority owner, has more than 25 years of experience in the industry, having previously worked for pension fund managers and investment platforms, including subsidiaries of GMACCM, Equitable Real Estate and Caisse de dépôt.

Basis teamed up with the city in 2016 to create the Emerging Development Fund, which has raised $20 million so far and is dedicated to providing loans to less established developers for predevelopment and acquisition costs.

Jones, who recently joined Mack-Cali Realty Corporation’s board of directors, serves as the chair of the Real Estate Executive Council, a trade association for minorities working in commercial real estate. She said the organization has put together a series of principles for real estate companies to follow, which includes “being intentional” about supporting minorities, not just in their hiring decisions, but in their business plans as well.

For its part, Basis has invested and loaned $800 million with other minority and women-owned commercial real estate platforms, Jones said. Additionally, 53 percent of the firm’s vendors are women and minority-owned firms, and 78 percent of Basis’ team is made up of women and minorities, she said.

In an extensive interview with The Real Deal this month, Jones talked about the industry’s need to put words into action and what strategies companies can implement to become more diverse.

“When people tell me that they can’t find minorities, I say, ‘You’re not looking in the right place,’” she said. “‘You’re not intentional about what you’re doing.’”

You launched your firm in the middle of the 2009 economic crisis. Why then? I saw many people leave the institutional framework and go out on their own during various downturns. I believe that there are opportunities in downturns. I was at a place where I knew that I had the track record of investing and lending. I had done it successfully for platforms and that this was my time to try to do it on my own.

At a recent panel, you said you felt that your capabilities have been questioned throughout your entire career. Can you talk about that? As an African-American woman in real estate, I have the double whammy — gender bias, as well as ethnic bias. Commercial real estate, as you know, has a severe problem with diversity, particularly at the senior levels. I’ve always felt like I had to be better, stronger, faster, more educated than my white male counterparts. I’ve had every experience from people being promoted over me that probably didn’t have as much experience as me, to being in meetings where people walked right by me because they assumed that I wasn’t in charge. Even recently [with my] fund, some investors, because I was a diverse manager, saw risk. It’s unconscious bias, and it’s there. It’s just harder for us.

A number of real estate companies came out and made statements in response to the death of George Floyd. What was your reaction to those statements, and do you think that they will lead to lasting systemic change? I am cautiously optimistic. I definitely sense that there’s some shift, and I appreciate the statements. I want to make that clear that it was encouraging to hear so many industry leaders and CEOs actually take a stand against systemic and structural racism because it is alive and well in the United States. I’m hopeful that it will lead to systemic change because the statements are not enough. We need action.

What steps do you think real estate companies can take to make these statements actionable? I believe that every firm needs to create a diversity business plan. I challenge people to think about diversity as a business imperative that needs to have concrete strategies. I often talk to CEOs and say, “What initiative would you ever start without a business plan? Can you imagine if you started a multifamily value-add business, and you didn’t have concrete strategies?”

One strategy could be, by way of example, look at your website. If you don’t have any board members or senior leaders who are African American, well, hello, that’s a strategy. We’re going to figure out how to change that. Have some performance metrics. You could say, “Well, 20 percent of our board is going to be diverse, or African American.”

What are some other steps? We continue to go and write checks or fund early stage programs, and what I think we really need for systemic change is to look at a broader ecosystem of diversity. You have to understand what’s going on with the African Americans in your company. Why haven’t they been promoted? Do they have sponsorship? Ask yourselves those questions. Then, of course, look through the senior leadership team and figure out how to affect change, and then finally on your board. We can’t just focus on hiring. That’s what everybody assumes is the way to go. And it is. But you also have to think about helping to create entrepreneurs. We should also look at ways to partner. Larger firms can partner with smaller African-American general partners. You have to have this dual approach, both hiring and helping to provide access to capital and credit.

Is that an issue you’ve encountered personally? The biggest challenge that I faced was access to capital. Not just capital, but access to lines, subscription lines, warehouse lines, working capital lines. Those are barriers to entry. There is not a single African-American–owned diversified commercial real estate platform in the United States that’s large and scalable, like a KKR or BlackRock or Brookfield, not one.

When I see that happen, then I’ll know we’ve really changed. And how that happens is partnership. We have to realize that none of us can do this alone. Who do you do business with? Don’t just look at your hiring, don’t just look at your partnerships and your boards and your senior leadership team. Who are your accountants? Do they have any black partners? Who are your lawyers? Who are your brokers? You have to be intentional. You have to measure. And you have to break down what the real problems are.

Over the years when I’ve asked real estate companies about the lack of diversity in the industry, their response has often been that real estate should be a meritocracy, which seems to gloss over the issues that you raised.  You know what I say? Let’s just pretend that we are both running a race. And if you think about it, African Americans after the Civil Rights Act, basically we were told, “Go run your race.” But if we were running a race and you had a significant head start — 400 years — how on earth can you ever expect to catch up in that race?

If you really think about it, the only way that I can catch up is if somebody picks me up in a car and drives me up.

This interview has been edited for length and clarity.

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