Former Google CEO Eric Schmidt and his wife Wendy purchased a sprawling Montecito estate for nearly half its original asking price.
The couple paid $30.8 million for the 11-acre hilltop property known as Solana, which overlooks Santa Barbara and the Pacific Ocean, according to the Wall Street Journal.
The property had been on and off the market since 2012. It first listed for $57.5 million, but by last year the asking price was down to just under $37 million.
The sellers, Bill and Sandi Nicholson, paid $5.25 million for the estate in 1999, and reportedly spent around $20 million to restore and renovate the property.
The main house is 22,000 square feet and has five bedrooms. The estate retains many of the 100-year-old-plus original features, including white Alabama marble and terra cotta.
Schmidt and his wife join numerous celebrities and business executives in Montecito, including Oprah Winfrey and Ellen Degeneres. Tesla designer Franz von Holzhausen recently bought a Richard Neutra-designed property there.
The Solana estate was built in 1915 by Arrow company chairman Frederick Forrest Peabody and in 1959 was home to the Center for the Study of Democratic Institutions, a then-influential think tank.
President Kennedy and Martin Luther King Jr. were among those who participated in discussions there. The property was sold in 1977.
The grounds are landscaped with lawns and garden features. There are also palm trees, lemon trees, banana trees, fig trees, and pomegranate trees.
Schmidt, who was CEO of Google from 2001 to 2011, stepped down as executive chairman of both Google and its parent company Alphabet last year. His net worth is estimated at $17.6 billion and he is currently chair of the U.S. Department of Defense advisory board. [WSJ] — Dennis Lynch
Jonathan Kislak with the Grosvenor House condos and 3570 Battersea Road (Flickr, Google Maps)
Jonathan Kislak, son of the late real estate investor Jay Kislak, traded his Pinecrest mansion for a Coconut Grove penthouse.
Kislak and his wife, Kristine, bought unit 3202 in the Grovenor House at 2627 South Bayshore Drive in Miami for $7 million, according to records. The sellers are Benny and Annie Bergeron, who had paid $7 million for the condo in 2013.
The two-story, 7,061-square-foot penthouse was designed by architect Jenifer Briley and features multiple terraces and a rooftop area with panoramic views of marinas and Biscayne Bay, according to the listing.
Jorge Uribe of One Sotheby’s International Realty represented both the sellers and buyers.
The four-bedroom, three-and-a-half bathroom condo was originally listed in 2017 for nearly $9.9 million. It had various price chops since then, most recently to $7.6 million in May 2019.
Last month, Kislak sold his 8,540-square-foot mansion at 3570 Battersea Road to Oscar J. Villa for $8.3 million. Kislak bought the Pinecrest home in 1995 for $2.2 million.
Kislak is a principal of Miami-based Antares Capital Corp., a venture capital firm, according to its website. He also served as deputy under secretary for small community and rural development of the U.S. Department of Agriculture during the George H.W. Bush administration.
Jonathan’s father, Jay, who died in 2018, was chairman of the Miami Lakes-based Kislak Organization. The company acquired and managed more than 7,000 multifamily units, and brokered more than 1,550 commercial real estate transactions, according to his obituary.
Banyan Street Capital CEO Rudy Prio Touzet and the two towers (Credit: Google Maps)
A company with ties to Miami-based Banyan Street Capital bought a Doral office complex for $43 million, marking a discount from its last purchase price four years ago.
The real estate investment firm bought the twin office buildings near the intersection of Northwest 36th Street and Northwest 87th Avenue, along with some adjacent properties, according to records. The seven-story towers were built in 1985 and 1990.
The seller, a company tied to Miami-based Rialto Capital, had paid $48.8 million for the complex in 2016, according to records. Hines sold the property at that time, but has continued to manage it, according to Hines’ website. Tenants include Citibank and New York Life.
Last year, Banyan Street was a selling partner in one of the largest office deals in the region. It was a co-owner of the 141,000-square-foot Offices at Doral Square, which Bridge Investment Group purchased as part of a $123 million deal.
Rialto originated as a division of homebuilder Lennar Corp., according to its website. Lennar used Rialto after the recession to purchase distressed real estate assets. But as real estate prices have risen, buying opportunities became more limited.
In 2018, Lennar sold its Rialto Investment and Asset Management business to investment funds managed by Stone Point Capital for $340 million.
South Florida’s office market was in high-growth mode prior to coronavirus. But recent activity may show trouble down the road. A majority of the positive absorption was due to move-ins of co-working firms WeWork and Industrious, which are especially at risk in a post-pandemic world.
(Source: National Multifamily Housing Council/Tableau)
September rent payments for market-rate apartments nationwide fell, the largest drop since the pandemic began in March.
A survey of 11.4 million market-rate units found 76.4 percent of those households made a rent payment in the first week of September. It marked a 4.8 percent-point drop from the same time last year, representing 552,796 fewer households sending a rent payment. It was also a 2.9 percentage-point dip from August collections.
The survey was conducted by the National Multifamily Housing Council, which lobbies on behalf of large multifamily firms and has released the tally each month since the virus took hold.
The decline in rent payments comes over a month after federal unemployment benefits expired, benefits that had provided individuals with up to an extra $600 a week. In response to the ongoing health crisis, the CDC announced a ban on evictions for nonpayment for households making less than $99,000, or $198,000 for joint tax filers.
For landlords, the eviction ban heightened concerns that, without further federal assistance, tenants will stop paying rent.
“Falling rent payments mean that apartment owners and operators will increasingly have difficulty meeting their mortgages, paying their taxes and utilities and meeting payroll,” said Doug Bibby, president of the National Multifamily Housing Council. “The enactment of a nationwide eviction moratorium last week did nothing to help renters or alleviate the financial distress they are facing.”
The apartments included in the latest rent payment survey are not rent-regulated, subsidized affordable housing, student housing or single-family rentals. Tenants tend to be higher earners, so the decrease could be particularly troubling.
Residents of below-market rate apartments, which typically cater to lower-income renters, were hit especially hard by the economic downturn. Lower-income households were also much more likely to have an employment disruption, according to the Federal Reserve.
Brookfield’s Ric Clark and Simon Property Group’s David Simon (Getty)
J.C. Penney is saved.
The retailer will be acquired by mall operators Simon Property Group and Brookfield Property Partners, avoiding liquidation.
Simon and Brookfield will pay about $300 million in cash and assume $500 million in debt to buy J.C. Penney, according to the New York Times. Some of the stores and distribution facilities will be divided into two property companies. The deal values the department store chain at $1.75 billion.
“We are in a position to do exactly what we set out to do at the very beginning of these cases and that is to preserve 70,000 jobs, a tenant for landlords, a vendor partner and a company that has been around for more than a century,” Joshua Sussberg, a lawyer at Kirkland & Ellis, which has been representing J.C. Penney, said at a bankruptcy hearing on Wednesday, the New York Times reported.
The move was somewhat expected as the liquidation would have dealt a significant blow to malls.
The retailer is one of the largest stores to file for bankruptcy protection during the pandemic. J.C. Penney entered proceedings with nearly 850 stores and about 85,000 employees.
The company has already closed several stores, resulting in layoffs across New York city and elsewhere.
It’s over for Starwood Capital Group’s U.S. mall portfolio.
The real estate investment firm lost control of seven shopping centers after defaulting on Israeli bonds earlier this year, according to the Wall Street Journal. A ratings downgrade on the debt triggered a clause that allows bondholders to take control of the properties.
Six parties — including Starwood — submitted bids for the portfolio back in May. A partnership between Pacific Retail Capital Partners and Golden East Investors beat out the five other parties. The partners did not disclose how much they paid for the malls.
The new owners plan to replace department store tenants or repurpose the malls into apartments or offices. The group also said they will restructure the mortgages, according to the Journal.
Miami Beach-based Starwood bought the portfolio of malls in California, Indiana, Ohio and Washington state from Westfield Group for $1.6 billion in 2013. It then refinanced the portfolio by raising 910 million shekels (about $268 million USD) on the Israeli bond market.
The bonds struggled in 2019, facing a class action lawsuit from Israeli investors and trading around 30 cents on the dollar for most of the year. The bonds then fell to around 15 cents during the coronavirus pandemic before trading was suspended in June.
In an interview with The Real Deal, Starwood Capital Group CEO Barry Sternlicht said the pandemic was “a dagger to the chest” for the retail industry but that the firm’s retail outfits were “not really significant investments.”
Daniel Schreiber, Glen Sanford, Andy Florance, Rich Barton, and Glenn Kelman
Real estate tech stocks rallied Wednesday after a three-day tech rout roiled the market.
After the market closed yesterday, Zillow stock was up 2 percent while CoStar climbed 1.44 percent. Redfin rose 6.85 percent and eXp World Holdings was up 10.55 percent. Two SoftBank-backed companies that went public this summer — Lemonade, an insurance tech firm, and KE Holdings, a Chinese real estate platform also known as Beike Zhaofang — were up 6.36 percent and 3.9 percent, respectively.
The Nasdaq Composite Index rose 2.7 percent Wednesday, the Dow Jones Industrial Average was up 1.6 percent and the S&P 500 climbed 2 percent.
Tuesday was a different story as Apple, Amazon and Tesla led a selloff, prompting the Nasdaq to plunge 10 percent.
Although tech has led the Covid recovery, sky-high valuations have stoked concerns about long-term economic prospects, prompting the selloff.
“Those gains didn’t make a lot of sense,” Donald Calcagni, chief investment officer with Mercer Advisors, told MarketWatch. “When you have Amazon trading at 120 times earnings and the economy is contracting 32 percent, that just doesn’t make sense.”
Before Wednesday’s rebound, Lemonade’s stock price was down 17.9 percent since Sept. 1, and KE Holdings was down 12.6 percent. For the same period, eXp’s stock price was down 10.4 percent, Zillow’s was down 4.1 percent, CoStar was down 6.6 percent and Redfin was down 3.8 percent.
Even with the selloff, the market is up around 50 percent from its March low. Some segments of real estate, including industrial and residential, have benefitted from a better-than-expected economic recovery. Proptech firms and portals are seeing accelerated adoption of their products.
Shares of Zillow began trading at $82.39 on Wednesday, triple its March 23 opening price of $27.19 per share. Redfin opened at $45.82, up from $11.50 on March 23, and CoStar traded at $797.56 Wednesday morning, up from $552.44.
Yousuf Hafuda, a Morningstar analyst, said that companies like CoStar and Zillow had been “significantly” overvalued before the selloff. The recent volatility reflects the “perceived winners and losers of the pandemic,” he noted, with tech valuations skyrocketing even as non-tech stocks languish.
“The growth and bright prospects are certainly there,” he said, referring to CoStar, “but investor giddiness has simply overwhelmed the company’s intrinsic value.”
But not everyone agrees.
On Sept. 2, Deutsche Bank upgraded Zillow’s stock with a target price of $106 per share, up from $88 per share earlier that day. Analysts noted significant “upside potential” to its core business, not to mention value from its instant home-buying operation, which CEO Rich Barton has called a “moonshot” opportunity.
“We see a path for the homes segment to drive more shareholder value … but we do not believe it needs to work for us to be bullish on Zillow’s shares,” they wrote.
Zillow’s stock shot up on Aug. 6 after the company beat analysts’ second-quarter estimates. Revenue rose 28 percent year-over-year, topping $768 million. Last week, Zillow economists predicted that new remote work options could add nearly 2 million buyers to the market if renters move to cheaper cities.
In general, the residential sector has been boosted by a stronger-than-expected housing market. Existing home sales shot up 25 percent in July, compared to a month earlier, according to the National Association of Realtors.
President Donald Trump and HUD Secretary Ben Carson (Getty; iStock)
This summer, President Donald Trump put low-income residents on notice: The suburbs would be off-limits to them.
His administration repealed an Obama-era rule known as Affirmatively Furthering Fair Housing — a moment amplified by a series of tweets from the president declaring victory for suburbs across the country.
“I am happy to inform all of the people living their Suburban Lifestyle Dream that you will no longer be bothered or financially hurt by having low income housing built in your neighborhood,” President Trump tweeted in July. “Your housing prices will go up based on the market, and crime will go down. I have rescinded the Obama-Biden AFFH Rule. Enjoy!”
The move was a long time in the making. Federal regulators first suspended the rule, which created a framework for local governments to eliminate discrimination and segregation in their jurisdictions, in January 2018.
The primary reasons for the change, according to the Department of Housing and Urban Development, was that AFFH was “overly burdensome and costly” and overstepped the federal government’s authority over localities’ zoning and land-use decisions.
Trump’s tweet revealed what many have suspected is behind the resistance to multifamily development in the suburbs — an aversion to low-income housing and the racial integration that comes with it.
“We knew this was coming,” said Elaine Gross, founder of ERASE Racism, a Long-Island based organization that works to combat racism in local housing policy. “In the proposed rules, HUD was already giving a nod to municipalities that basically said, ‘Don’t worry, we won’t do anything to force you to integrate.’”
HUD, under Secretary Ben Carson’s watch, supplanted AFFH with a measure that allows localities to self-certify that they are abiding by fair housing laws. Opponents to the change argue that it could further embolden governments to keep exclusionary policies on the books. That could put multifamily developers at odds with the White House as they seek to build in suburban areas — at a time when demand for housing outside urban centers is on the rise.
The Trump administration’s fair housing rollback also puts some developers on the same side as Rep. Alexandria Ocasio-Cortez, usually an ardent opponent of the real estate industry. Ocasio-Cortez swiftly decried the fair housing rollback, and introduced legislation in the House of Representatives to block the change.
“We must hinder President Trump’s efforts to segregate communities and to discriminate against black and brown homeowners and renters,” Ocasio-Cortez said in a statement. “We cannot return to the days of redlining and white flight.”
No as of right, out of luck
Localities around the country have long argued that the AFFH requirements were onerous and just created more red tape for communities to slog through.
Westchester County, for example, has long faced scrutiny for exclusionary housing practices, which culminated in the county repeatedly submitting reports to the federal government laying out how it solved the issue. The reports were rejected by the Obama administration, and then accepted by Trump’s in 2017.
In a recent interview with Fox News, President Trump called Westchester “ground zero” for Democrats’ efforts to “destroy the suburban, beautiful place.”
Under the 2015 rule, HUD required localities receiving federal funds for housing to analyze patterns of racial bias in their neighborhoods using data provided by the agency. Localities were required to make those findings public and then lay out plans to further reduce barriers to fair housing.
“The position [Trump’s] taken seems contrary to everything I’ve seen and heard in my 50-year career.”
“This idea that the federal government wouldn’t stand behind the efforts to upzone neighborhoods, to provide a mix of housing, to me is really heartbreaking,” Glenn Kelman, CEO of the national brokerage Redfin, told The Real Deal in August. “There’s just no way you can argue that schools, jobs, groceries, everything, can be separate but equal.”
Affordable housing developer Eli Weiss acknowledged that federal involvement in land-use decisions could delay projects and create additional costs. He also said he can understand why localities would want control over creating policies that encourage affordability and diversity.
“That all works in theory,” Weiss said. “But if we look at it historically, we wouldn’t have the affordable housing crisis that we’re in if everyone had looked closely at the issue.”
New York State’s policy of home rule means that each locality — there are 782 in New York’s Metro region — is responsible for its zoning. As a result, very few municipalities allow as-of-right multifamily development.
“It’s always been difficult to create low-income housing in the suburbs,” said Alan Hammer, who practices law at Brach Eichler and owns about 12,000 multifamily units in the Tri-state area. He added that Trump’s decision to rescind Obama’s fair housing requirement would further constrain low-income housing.
“The position he’s taken seems contrary to everything I’ve seen and heard in my 50-year career,” said Hammer, a close confidant of Charles Kushner and former acting chairman of Kushner Cos. “He’s taken that position for political reasons.”
“This is 2020. People accuse the president of a white suburban dog whistle. There are minorities who live in the suburbs and outnumber whites in the suburbs in very many instances.”
But Lynne Patton, head of HUD’s New York office, told TRD she doesn’t believe eliminating the AFFH rule will deter affordable housing development. She said HUD analyzed the country’s top 100 metro areas, by population and size, and found that 52 percent of African Americans, 60 percent of Hispanics and 62 percent of Asian Americans live in suburbs.
“I think the racially ignorant assumption by the mainstream media that only suburban whites live in the suburbs, only upscale whites live in the suburbs, is just not accurate anymore,” Patton argued.
“This is 2020,” she noted. “People accuse the president of a white suburban dog whistle. There are minorities who live in the suburbs and outnumber whites in the suburbs in very many instances.”
The home value proposition
William Case, CEO of Cincinnati-based home lender American Mortgage Service, said the pendulum may have swung too far in favor of allowing localities to hinder affordable, low-income and multifamily development.
“It’s probably weaker than it needed to be,” he said. “I believe that some of the actions being taken are purely political.”
In April, for example, a developer sued the city of Warner Robins in Texas for blocking a 90-unit rental project funded, in part, by low-income housing tax credits. The lawsuit alleges that opposition to the project was “driven in part by racial animus” and a desire to prevent low-income housing in the community.
The developer, Woda Cooper Companies, maintains that the city failed to adhere to its pledge affirmatively further fair housing — a condition of receiving certain federal funds — when it rejected the project.
In one of several incendiary tweets, Trump suggested that low-income housing depresses property values in the suburbs.
But Katherine O’Regan, who spent three years at HUD during the Obama administration and now teaches public policy and planning at New York University, said there’s no reason to believe that revoking AFFH will increase property values.
In 20 of the least affordable real estate markets around the country, including San Francisco and New York, for example, low-income housing had virtually no effect on home values between 1996 and 2006, according to a 2016 study by Trulia.
Using fear to address housing issues, at a time when communities are figuring out what investments to make while grappling with the pandemic, is “highly problematic,” O’Regan argued.
“Where housing gets created, where you invest in infrastructure, in communities, designing things and changes to schools, all of those come up for grabs,” she said, likening the president’s comments to neighborhood busting and racial steering in the 1960s and 1970s.
Nevertheless, lowering property values “can be a self fulfilling prophecy if you get people very afraid,” O’Regan added. People in such communities could potentially flee, fearing change in their neighborhood because they perceive their property values will be negatively affected.
“It’s a circular logic,” O’Regan said. “If a bunch of people leave a neighborhood, the property values will actually go down.”
Unintended outcomes?
But by making exclusionary zoning more about keeping low-income housing out — rather than having too much paperwork — Trump’s comments could actually boost arguments for fair housing, according to several housing advocates.
The polarizing rhetoric could even drive voters to the polls in November, said Jolie Milstein, CEO of the New York State Association for Affordable Housing.
“I think change is coming,” Milstein maintained. “The current president making those statements is almost helpful to the fair housing movement, because the kimono is open and we’re really seeing what the thinking is.”
Joseph Kriesberg, president of the Massachusetts Association of Community Development Corporations, echoed that sentiment. He said the president’s comments “laid bare what is driving some opposition to affordable housing” and noted that Trump’s remarks could make it easier for advocates to call out opponents of development for using euphemisms such as “preserving the character of the neighborhood.”
“We have a lot of suburban communities that vote very liberally — the stereotype is that they have a Black Lives Matter poster in front of their mansions,” Kriesberg said of residents in the Boston area. “Then they’ll oppose new rental housing.”
While the 2015 AFFH rule was appealed, jurisdictions are still required under the 1968 Fair Housing Act to “affirmatively further fair housing.”
Under HUD’s new measure, local governments fulfill this requirement through “any action rationally related to promoting” fair housing, which is defined as “affordable, safe, decent, free of unlawful discrimination, and accessible under civil rights laws.”
O’Regan noted that this broad definition could expose localities to litigation, since HUD is no longer signing off on their housing practices.
“For those who don’t want any burden, don’t want to do any analysis and simply don’t care about fair housing issues, it might sound like that’s a gift,” she said. “I would be a little bit worried if I was a jurisdiction: What standards am I held to? What kind of a process is supposed to be behind that self-certification?”
O’Regan added that while current leadership at HUD may not challenge problematic self-certifications, future leadership could reverse course. Democratic Presidential nominee Joe Biden has already indicated that he would re-implement the AFFH rule if elected.
Kriesberg argued that AFFH isn’t a silver bullet for resolving policies that perpetuate racism. The rule provided a framework for localities to use federal funding in a way that promoted fair housing. Governments that already strive to be proactive about rooting out segregation will likely continue to do so, he said, while others will maintain the status quo.
“There’s nothing stopping us from changing,” he said. “It is just that HUD isn’t going to push us.”
Facing foreclosure from their lender, the owners of the Variety Hotel in Miami Beach listed the property for sale asking $36.5 million.
A company tied to Adam Verner of New York-based Springhouse Partners and Chaim Cahane of Forte Capital Management owns the 68-key hotel at 1700 Alton Road. The property, originally developed in 1923, was recently renovated and converted into a hotel that never opened.
Susan Gale of One Sotheby’s International Realty has the listing for the property, which includes a lobby restaurant and bar, and a courtyard with a swimming pool. The Mediterranean revival-style building, originally known as the Mayflower Hotel, features 4,247 square feet of ground-floor retail that’s partially leased to Regions Bank.
In June, a company tied to BridgeInvest sued AC 1700 Alton Owner LLC, alleging the developer failed to make payments on a $25 million loan. Attorney Isaac Marcushamer, who represents the lender, said the developer hasn’t made any payments since April. Jeff Schneider of Levine Kellogg Lehman Schneider and Grossman, who represents the hotel owner, could not be reached for comment. The suit is still pending in Miami-Dade County.
Gale said the owners are motivated to sell and are not looking to operate the hotel, which recently received its certificate of occupancy. “There is a debt that needs to be paid off,” she said.
The developers partnered in 2015 to purchase the property for $21 million.
The building is across the street from a new Trader Joe’s-anchored mixed-use project, developed by Rock Soffer of Turnberry Associates, Elion Partners and members of the Sredni family.
The hotel owners spent three years renovating the property, likely spending close to the asking price on the redevelopment, according to Gale. “The opportunity here is for a buyer that doesn’t want to go through two to three years of renovations,” she said.
A number of buyers are on the hunt for distressed and heavily discounted properties, but many are waiting for prices to drop even further, experts say. The hotel market is not expected to normalize for another two to three years.
“Anyone in hospitality, they know things will get back to normal,” Gale said. “Everyone wants to be in Miami.”
225 Arabian Road & E. Llwyd Ecclestone III (Realtor, Linkedin)
A company tied to Palm Beach developer E. Llwyd Ecclestone III sold a spec house on the island for $5.7 million.
Ecclestone’s 225 Arabian Road LLC sold the house at 225 Arabian Road to Diano-Smith LLC, a Delaware entity tied to Wilmington Trust Company, property records show.
The four-bedroom, 4,247-square-foot home, designed by architect Roger Janssen of Dailey Janssen Architects, features five-and-a-half bathrooms and a pool, and is walking distance to the beach, according to the listing. Patricia Dudan Ecclestone of the Corcoran Group was the listing agent.
The new home went on the market asking $7.4 million in July 2019. The price was reduced to $6.7 million in December.
Ecclestone III bought the property in 2017 for $2.4 million, demolished the house that was previously on the site, and built the home in 2019, records show.
Ecclestone III, who heads Ecclestone Signature Homes, a division of Four Points Construction LLC, is a third-generation homebuilder in Palm Beach. Ecclestone’s father, E. Llwyd Ecclestone Jr., developed the PGA National Resort in Palm Beach Gardens.
The rise of remote work puts cash flows for U.S. office real estate investment trusts at risk in the near and long term, according to a recent report from Fitch Ratings.
Trepidation about the future of the U.S. economy has led companies to sign fewer and shorter leases, which hurts cash flows for office REITs in the near future.
Moreover, the broader shift toward remote work — reflected by the moves of tech giants such as Google and Facebook — could reduce demand for new office space years down line and heighten the likelihood that tenants do not renew their existing leases.
Fitch anticipates a slight dip in net operating incomes for office REITs for the remainder of the year, followed by a rebound next year and growth in 2022 and 2023 as the economy and occupancy rates improve. Still, the report warns that “subdued” demand for office real estate could mean that the fruits of an economic recovery might not spread to the office sector.
The outlook for some REITs looks better than others, according to Fitch projections.
Same-store net operating income, or SSNOI, is expected to fall only 3 percent annually for Vornado Realty Trust, the second biggest commercial landlord in New York City by square footage.
For Mack-Cali Realty, a REIT that chiefly invests in suburban office properties, Fitch expects SSNOI to fall 6.9 percent in 2020. Fitch has given Mack-Cali a “BB” rating, which means bonds sold by the company are at “elevated vulnerability of default risk.” Bonds with ratings BBB are widely considered “junk” bonds.
Still, some mitigating factors might lessen the blow the pandemic has dealt to office REITs. Many office tenants are locked into long-term leases, so rent payments from existing tenants will likely be stable into the next decade. Only about 10 percent of office leases expire over the next few years, according to Fitch.
Social distancing will also likely contribute to the reversal of the decade-long trend of office densification as prospective tenants seek out bigger spaces.
Century 21 will wind down operations at its 13 stores (Getty)
UPDATED, Sept. 10, 12:40 p.m.: Century 21 Stores is the latest retailer to file for bankruptcy, and it blames insurance providers for its collapse.
The New York-based off-price retailer filed for Chapter 11 bankruptcy on Thursday and announced it will wind down operations to close its 13 stores across New York, New Jersey, Pennsylvania, and Florida.
The company said it was forced to file for bankruptcy after insurance companies declined to pay its business interruption insurance claims worth $175 million.
“While insurance money helped us to rebuild after suffering the devastating impact of 9/11, we now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time,” Century 21 co-CEO Raymond Gindi said in a statement.
Increasingly, companies are filing lawsuits against their insurers, alleging they are owed money for business interruption claims caused by the pandemic. Insurers argue that most of the policies have exceptions for viruses. Courts, for the most part, have sided with insurers.
Some states, such as California, New Jersey and New York, have proposed legislation that would require insurers to pay these claims.
Century 21 filed for bankruptcy in the Southern District of New York. The company said it is removing to the bankruptcy court a lawsuit pending in the Supreme Court of the State of New York against several of its insurance providers.
The company is planning a going-out-of-business sale at all of its locations and on its website.
Century 21 was founded in 1961 in Brooklyn. The store offers men’s, women’s, and children’s apparel, footwear, outerwear, lingerie, and accessories, along with beauty and home goods. Its locations include Manhattan, Brooklyn, Westbury, Rego Park, Valley Stream and Yonkers in New York; East Rutherford, Paramus, Elizabeth and Morristown in New Jersey; and Sunrise in Florida.
Traditional brick and mortar retail has been hit hard by the pandemic. Among the list of major retailers that have filed for bankruptcy are Tailored Brands, Brooks Brothers, J. Crew and Neiman Marcus Group, which is closing its anchor store in Manhattan’s Hudson Yards.
Nationwide, up to 25,000 retail stores could shut down this year, according to reports.
Ram Realty CEO Casey Cummings and 15601 Southwest 127th Avenue, Miami (Credit: Google Maps)
Ram Realty bought land north of Zoo Miami for $9.6 million, for a mixed-use development under construction anchored by Walmart.
Palm Beach Gardens-based Ram bought the site at 15601 Southwest 127th Avenue from the University of Miami, according to records.
The development has been known by the names Coral Reef Commons, as well as Botanical. Retail that is already open at the development include Starbucks, Chili’s and Panera. The development also includes Mareas at Botanical, a 408-unit multifamily project.
An LA Fitness is also planned for the mixed-use project, which promises a total of 900 residential units, according to online listings. Bozzuto Group is handling leasing for Mareas at Botanical. Centre-Line Real Estate handles leasing for the retail space.
Ram previously bought 80 acres from the University of Miami for the mixed-use project in 2014.
The project became complicated by protected pine rockland on the site, which Ram agreed to keep as a preserve.
Environmentalists unsuccessfully sued to stop the development.
In August, a 243-unit multifamily building developed by Ram Realty in Fort Lauderdale launched virtual leasing after gaining its certificate of occupancy.
Orchard’s CEO and co-founder, Court Cunningham (Credit: iStock)
iBuying startup Orchard has raised $69 million in its latest funding round.
The New York–based company, formerly known as Perch, allows homeowners to buy a new home before they sell their own. In recent years, it’s broadened its offerings to include a title and escrow unit and a lending service.
The Series C round was led by Revolution Growth, according to Housing Wire, which first reported the news. A collection of existing backers, including FirstMark, Navitas and Accomplice, were also involved.
Orchard’s CEO and co-founder, Court Cunningham, told Housing Wire the company’s goal was to make the home-sale process more streamlined.
“Our vision is to bring real estate into the modern age by allowing customers to manage their entire experience through one simple digital platform,” he said.
The startup, which raised $36 million earlier this year, connects homeowners with an adviser to help them through the sale and purchase process. When the homeowners find a new property, Orchard fronts the cash to put in an offer before they sell their existing home. Orchard then facilitates the sale of the old home, charging a 6 percent fee.
If the home is not sold in 90 days, Orchard offers to buy it. In February, Cunningham told The Real Deal that 85 percent of homes are sold before the deadline.
“We feel like real estate agents that are not adding a ton of value should charge a more modest fee or, you need to create value and share it back with the consumer to justify that 6 percent fee,” Cunningham said, “and that’s what we’re doing.” [HW] — Sylvia Varnham O’Regan
Vladislav Doronin and Naomi Campbell (Credit: Eamonn McCormack/Getty Images)
Real estate developer Vlad Doronin is suing his ex-girlfriend, supermodel Naomi Campbell, for millions of dollars.
Doronin, who develops projects in South Florida and New York, filed a summons in New York County Supreme Court on Friday. He alleges that Campbell wrongfully refused to repay loans that Doronin made to her and failed to return personal property valued at more than $3 million. TMZ first reported the lawsuit.
Campbell and Doronin dated between 2008 and 2013, according to the Telegraph. Among the gifts he reportedly gave her is a 25-bedroom house on Cleopatra Island in Turkey, which is shaped like the Egyptian Eye of Horus.
Doronin is chairman and CEO of OKO Group, owner and chairman of Aman Resorts, and founder of Moscow-based Capital Group.
Paul M. O’Connor III, a partner at Kasowitz Benson Torres LLP, which represents Doronin, said in an emailed statement that his client tried to resolve “a series of ongoing disputes” with Campbell in private. “Unfortunately, despite our client’s best efforts that was not possible, and seeking resolution through the legal system is the only option remaining,” the statement reads.
Campbell’s law firm in London did not respond to requests for comment.
In South Florida, Doronin’s OKO Group is working on a number of developments, including a Class A office tower in Brickell, a luxury Aman-branded hotel and condo building in Miami Beach, and condo projects in Edgewater and Brickell. The firm also owns property in Fort Lauderdale.
In New York, OKO is partnering with Cain International on a luxury condo conversion of the Crown Building. Last year, the developers closed on a $750 million construction loan for the project.
941 North Venetian Drive (Kris Tamburello for Douglas Elliman)
A group of developers sold a newly built Venetian Islands spec home for $13.6 million.
Eduardo Otaola, Rodrigo Diaz and Eduardo Lucca sold the waterfront mansion at 941 North Venetian Drive in Miami to a land trust managed by Eric A. Jacobs.
The 9,228-square-foot mansion was completed last year and hit the market in October for $18.5 million. It sold for a 26 percent discount off the original asking price.
Dina Goldentayer
Dina Goldentayer of Douglas Elliman represented the buyer and seller. Elliman declined to comment on the deal.
The Venetian Islands home has five bedrooms and eight bathrooms, a movie theater, office, staff wing and a three-car garage.
The developers bought the Biscayne Island lot in 2015 for $4.8 million and broke ground on the spec home a year later. They hired interior designer James Wall of Thirlwall Design to furnish the home with Minotti furniture and more than $2 million of artwork and sculptures, according to the listing.
In June, the former CEO of Bolthouse Farms listed his newly built Venetian Islands estate for $34 million. Professional race car driver and investor Chapman Ducote sold his home on San Marco Island for $8.4 million in July.
JPMorgan CEO Jamie Dimon and 383 Madison Avenue (Getty; Google Maps)
JPMorgan is heading back to the office.
The bank, one of New York City’s largest employers, told senior employees in the sales and trading division that they and their teams are to return to the office by Sept. 21, the Wall Street Journal reported.
By directing employees to return after months of working from home, JPMorgan’s message is clear: It’s safe to head back to the office. Executives said employees with childcare issues and medical conditions that make them more vulnerable to the coronavirus can continue working from home. Sept. 21 is also the day New York City public schools return to in-person classes.
The grand work-from-home experiment has presented a paradox for JPMorgan and other large financial firms. Executives believe that the in-person interaction and camaraderie that exist on banks’ large trading floors is an important part of their success.
Yet banks have posted record-high trading revenues during the first half of 2020. JPMorgan’s trading revenue was up 79 percent in the second quarter from last year at $9.7 billion.
Not all banks are as eager to return as JPMorgan is, though.
Deutsche Bank’s sales and trading employees are making plans to work from home two or three days a week even once the pandemic is over, according to the Journal. UBS Group executives told employees that remote working is here to stay.
“We expect you to return at your own pace and when you feel comfortable,” executives wrote in a note to employees Tuesday.
Some of Manhattan’s largest landlords have been pressuring tenants to return to their offices. [WSJ] — Rich Bockmann
Jeff Ardizon, Principal, The Estate Companies, and Robert Suris, Managing Principal, The Estate Companies, with a Soleste Spring Gardens rendering
The Estate Companies scored a $36 million construction loan for an eight-story apartment complex in Miami’s Health District.
Bank OZK provided the financing for Soleste Spring Gardens at 1033 Spring Garden Road in Miami, according to a press release. The 240-unit complex will offer studios, one- and two-bedrooms from 400 square feet to 1,100 square feet. Amenities will include a pool, cabanas, dog park and pet spa.
JLL Capital Markets arranged the financing on behalf of the Estate Companies.
The firm spent $3 million in February 2019 on part of the property that will house the development.
The Estate Companies, led by Robert Suris, has several South Florida projects in the works. It is developing Miami’s first large-scale Opportunity Zone development, Soleste Grand Central in downtown Miami. The firm also recently paid $15.25 million for a five-acre site occupied by a former Ramada Hotel in Hialeah, with plans for redevelopment.
In addition to Soleste Spring Gardens, the firm plans to break ground on two new projects this year in Dania Beach and North Miami Beach. The Dania Beach project secured a $4.7 million loan earlier this month.
In February, the Estate Companies completed its fourth new rental project in West Miami, Soleste Twenty2.
President Donald Trump and Joseph Biden (Getty, iStock)
As the pandemic continues to wreak havoc on real estate, industry donors are siding with Joe Biden over President Donald Trump, records show.
They have so far given $17.1 million to the former vice president’s campaign and political action committees backing him, and $15.6 million to Trump, according to the Center for Responsive Politics, a nonpartisan research group which tracks money in U.S. politics.
Although markets have prospered under presidents of both parties, Republicans have long been regarded as more business-friendly. And Trump hails from the real estate world. Investors, however, value certainty above just about everything else — and the chaos of Trump’s first term has driven some real estate players to retract their support.
Some longtime Trump backers are holding off on donating to his campaign, while prominent figures in New York City real estate, where Trump got his start, are betting on Biden. Other firms are hedging their bets by giving to both candidates.
Backing the Democratic challenger might open the door for stricter regulation of capital markets and higher taxes on the wealthy, but many in the real estate industry are willing to take that chance or feel the tradeoff would be worth it.
“A competent, rational and scientific-based response to Covid is essential for the real estate industry,” developer Douglas Durst, president of the Durst Organization, said in a statement about why he put $14,000 into Biden’s campaign against Trump.
But in a less businesslike explanation, a spokesperson also said Durst wants that “grifter fascist scumbag gone.”
The Trump administration has in the past drawn enthusiastic support from the real estate industry, and continued to do so in 2020. Nonetheless, support for his opponent surged in this election cycle.
Real estate industry executives who backed Biden this year include Charles Bendit, co-CEO of developer Taconic Investment Partners, who donated $2,800 to Biden’s campaign in January, and Scott Rechler, CEO of RXR Realty, who donated $50,000 in June.
Bendit declined to comment on his donation, but said investments in infrastructure and affordable housing are both “sorely needed” in New York City, where his firm is based. A spokesperson for RXR declined to comment.
Norman Radow, CEO of Atlanta-based developer Radco Companies, gave $250,000 to Biden’s campaign. Jeff Worthe, president of Worthe Real Estate Group, a Los Angeles-area developer, gave $100,000, as did Dan Tishman, vice chairman of Tishman Realty, and affordable housing developer Jonathan Rose.
Wayne Jordan, CEO of Oakland-based investment and office development firm Jordan Real Estate Investment, also donated $100,000 to Biden. Michael Van Konynenburg, president of investment bank Eastdil Secured, gave $50,000.
Rose, Tishman and RADCO Companies declined to comment. Jeff Worthe, Wayne Jordan and Van Konynenburg did not return requests for comment.
Campaign contributions are public, and industry sources who previously donated to Biden said privately they are wary of drawing the ire of Trump and his supporters for backing the Democrat directly. Many instead gave generously to political action committees which spend for things like television ads on Biden’s behalf.
George Marcus, who heads real estate brokerage Marcus and Millichap as well as Essex Property Trust, a publicly traded real estate investment trust which owns more than 60,000 apartments on the West coast, is a prolific Democratic donor.
Marcus and his wife Judith backed Biden last May, chipping in $2,800 to the candidate, but have yet to donate directly to Biden this year. Marcus is not sitting out the race, however; he has sent nearly $4.5 million to political action committees which spend on Biden’s behalf.
A spokesperson for Marcus declined to comment.
Joe Gebbia, co-founder of Airbnb, which is preparing an IPO, in January gave $100,000 to Unite The Country, a PAC that has spent $22 million for Biden. Kenneth Fisher, co-managing partner of New York City-based real estate investment firm Fisher Brothers, donated $50,000 to the same committee. Stewart Bainum Jr., who heads up Choice Hotels, a hotel franchisor that operates 7,100 hotels and senior housing facilities, donated more than $600,000 to Biden’s campaign directly and later $2 million to Unite the Country.
Fisher declined to comment. Gebbia and Bainum did not return a request for comment.
Most firms chose one candidate or the other, but records also showed splits at companies — even at the top.
Stephen Schwarzman, a strong and vocal supporter of Trump’s and CEO of Blackstone Group, the world’s largest commercial landlord, donated $3 million to America First Action, a PAC that supports the president. Jonathan Gray, president of Blackstone, has put more than $1.3 million toward Biden and other Democrats in this election cycle.
A person familiar with the firm’s thinking noted that its employees’ donations to Biden far outnumbered those to Trump. Blackstone declined to comment.
It is not the only firm to back both sides.
Related Companies’ top brass Jeff Blau and Stephen Ross donated $35,500 each to Senate Republicans, and a high-profile fundraiser Ross hosted for Trump last year caused a backlash that the Hudson Yards mogul later said he regretted.
A spokesperson for Related said the company has funded both sides and that employees at the firm have supported or plan to support Biden’s campaign. Ross has declined to say how he will vote in November.
Although the country is perhaps more politically divided than ever in advance of a presidential election, many in the real estate industry are more focused on what will follow it.
“The last thing markets want is uncertainty,” said Jon Woloshin, who heads real estate at UBS Global Wealth Management. “Once we know who is in the White House and who controls Congress, then we can talk about policy.”
Florida restaurant chain TooJay’s Deli is emerging from bankruptcy with a new owner.
The West Palm Beach-based deli filed for Chapter 11 bankruptcy in April as a result of the impact of the coronavirus pandemic, which forced restaurants to shut their indoor dining rooms down temporarily.
When it filed for bankruptcy, the company had 28 locations. Now, it has 21 locations in Florida, including in Boynton Beach, Palm Beach Gardens and Jupiter, according to its website.
TooJay’s lender, Monroe Capital, a Chicago-based asset management firm, invested in TooJay’s, allowing the deli chain to continue operating without debt. Monroe acquired the company at auction in August, according to the South Florida Business Journal.
TooJay’s owed Monroe Capital $25.5 million for loans provided in October 2018. Boston Market had the second-highest bid, the Business Journal reported, citing court documents. It had between $50 million and $100 million in assets and liabilities when the company filed for bankruptcy.
The deli chain, which was founded in 1981 in Palm Beach, tried to cut costs by reducing its full-time employees, and received a $6.4 million loan from the federal Paycheck Protection Program. [SFBJ] – Jordan Pandy
