MSC Cruises gets green light for $300M terminal project at PortMiami

A rendering of the project

A rendering of the project

The Miami-Dade County Commission on Thursday approved a $300 million terminal development by MSC Cruises at PortMiami.

The cruise line plans to build its two-terminal building on 16.7 acres, under a 62-year lease, which may mark the biggest lease deal in port history.

Holland & Knight partner William R. Bloom, who represents MSC, said the company would pay rent totaling $2 billion over the 62-year term of the operating lease.

“I think this is the largest [lease] deal the port has ever done,” Bloom said. PortMiami has approved shorter lease deals for preferential berthing agreements “in the neighborhood of 30-year terms,” he added.

The MSC lease won’t have options to extend the term, Bloom said.

MSC plans to build a single building at PortMiami with two terminals where two cruise ships could operate simultaneously.

The MSC project was one of 11 projects at PortMiami that commissioners approved on Thursday for cruise lines, including Carnival Cruise Line, Norwegian Cruise Line and Virgin Voyages.

“These PortMiami deals constitute the most extensive transactions done by our port simultaneously,” Miami-Dade County Mayor Carlos Gimenez said. “These deals are expected to generate a total minimum revenue guarantee of approximately $4.6 billion in wharfage, dockage and capital recovery fees during the initial phase of the deals.”

MSC – which moved its South Florida operations from Port Everglades in Fort Lauderdale to PortMiami in 2013 – plans to base four cruise ships in Miami in the upcoming winter season, up from just one three years ago.

“But we have bigger ambitions,” said Roberto Fusaro, president, MSC Cruises USA.

PurduePharma family behind office purchase in downtown West Palm, Dwyane Wade wants out of Miami Beach manse: Daily digest

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 6:00 p.m.

The Sackler family is behind a nearly $7 million sale of a downtown West Palm Beach office building purchased this summer. The Sacklers, owner of OxyContin-maker Purdue Pharma, purchased the Glidden Spina + Partners building in July, the Palm Beach Post reported, less than two months before Purdue Pharma filed Chapter 11 bankruptcy protection amid thousands of opioid lawsuits. [Palm Beach Post]

Dwyane Wade, Gabrielle Union and the North Bay Road home (Credit: Getty Images,

Dwyane Wade, Gabrielle Union and the North Bay Road home (Credit: Getty Images,

The Miami Heat’s former star player Dwyane Wade wants to complete one last sale in Miami Beach. Wade, who retired from the NBA this year, listed his home at 5980 North Bay Road for $32.5 million, according to the Wall Street Journal. Wade and his wife, actress Gabrielle Union, are now based in Los Angeles. [TRD]

A trillionaire, prime minister of Israel and president of the world. Those are all the things WeWork founder and CEO Adam Neumann has said he wants to be, according to a new profile of a leader who is struggling to take his company public. [WSJ]

Miami home sales fell 13 percent in August, adding to mounting signs that Miami’s housing market is cooling down. Closed sales fell to 3,493, compared to 4,034 sales in August 2018, according to the report by RE/MAX. [TRD]

From left: Compass’ Jason Post, CEO Robert Reffkin, and COO Maelle Gavet (Credit: Wharton UPenn)

Compass’ top communications executive is out. Jason Post, who joined the brokerage nine months ago, will depart as the company mulls plans for an IPO. Post previously worked for Uber and the Bloomberg administration. [TRD]

A Miami real estate agent is challenging the time-honored notion of agents as independent contractors with a lawsuit that seeks class action status.
Former Cervera Real Estate agent Beatriz Santamaria is suing the Miami brokerage for allegedly misclassifying salespeople as independent contractors and violating minimum wage and overtime provisions of the Fair Labor Standards Act. [TRD]

27 East Dilido Drive

27 East Dilido Drive

Time Warner’s general counsel wants $15 million for his Miami Beach mansion. Time Warner executive Paul Cappuccio, who was set to receive $26.7 million as a result of the merger with AT&T, listed the seven-bedroom, 7,167-square-foot home at 27 East Dilido Drive in the Venetian Islands. Julian Johnston, who recently joined the Corcoran Group, has the listing, according to the MLS.

A Brickell condo association will have to pony up a $300,000 settlement for overcharging residents extra fees when they applied to rent a unit. Miami couple Joshua and Allison Kobasky filed the class-action lawsuit against the The Plaza 851 Brickell Condominium Association after it required they fork over $250 more than what is legally allowed in Florida, according to the Miami Herald. Nearly 600 people were eligible to participate in the class action, and each person who did will receive $250. [Miami Herald]

A private company that acquired a piece of a Hollywood park wants Broward County to pay $500,000 to buy the land, or pay $6,000 a month in rent. A lack of communication between the county and its parks department is what allowed the $25,000 sale to happen, according to the Sun Sentinel. Broward County’s tax division put the land up for auction after the previous owner failed to pay their taxes. [Sun Sentinel]

Compiled by Katherine Kallergis

More like WeWait? Co-working giant to postpone IPO, report says

Adam Neumann, WeWork's co-founder and CEO (Credit: Getty Images, iStock)

Adam Neumann, WeWork’s co-founder and CEO (Credit: Getty Images, iStock)

WeWork’s parent company is reportedly planning to postpone its initial public offering following weeks of scrutiny over the co-working firm’s valuation and corporate structure.

Sources told the Wall Street Journal that the IPO roadshow would be put on hold until at least mid-October, following the Jewish High Holidays, despite earlier reports that WeWork’s IPO roadshow would kick off as early as this week.

WeWork’s co-founder and CEO Adam Neumann has been under significant pressure since the company’s IPO prospectus was filed in August. The filing revealed $47 billion in U.S. landlord commitments over 15 years and just $4 billion in committed revenue, as well as huge personal loans issued by the company to Neumann and other executives.

The company faced further criticism over revelations that its board was entirely male, and that Neumann was paid $5.9 million to sell the rights of the word “We” to WeWork. Nuemann later returned the payment and appointed a female board member.

Last week, Neumann reduced the power of his voting rights to 10 votes per share from 20. And although he still has voting control, the board can now remove him as CEO. The change in corporate governance last week also limited Neumann’s ability to sell stock in the three years that followed the IPO.

WeWork planned to raise at least $3 billion in its IPO on the Nasdaq Stock Exchange, but rumors swirled last week that limited investor appetite could see a valuation fall below $20 billion.

WeWork’s largest outside investor, SoftBank, has also urged the company to postpone the offering, pointing to the cool response from investors.

WeWork lost $1.61 billion last year, with revenue totaling about $1.82 billion.

[WSJ] — Sylvia Varnham O’Regan

Carl Icahn is moving his firm from NY to Miami, Michael Shvo’s hotel plan could cost him $500M: Daily digest

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 5:00 p.m.

Carl Icahn

Carl Icahn

Carl Icahn’s decision to relocate his firm from N.Y. to Miami could be SALT-related. The billionaire investor and noted corporate raider is planning to move his investment firm from New York City to Miami, and the SALT tax deduction could be the reason. [TRD]

Michael Shvo’s South Beach hotel plan could cost him $500 million. Between buying the Raleigh Hotel, pending deals to purchase two neighboring boutique hotels and proposing a new residential tower, Michael Shvo and his partners are already looking at a $250 million investment — and that amount could double. [TRD]

From left: Francis Suarez, Jorge Mas, and David Beckham, with a rendering of the Miami soccer stadium

From left: Francis Suarez, Jorge Mas, and David Beckham, with a rendering of the Miami soccer stadium

Miami officials want a contract for thee David Beckham-led group’s stadium deal by October. The Miami City Commission is seeking to vote on contract by the development group for the $1 billion stadium complex on either Oct. 24 or Oct. 31. [TRD]

A parcel bordering the $4 billion Miami Worldcenter megaproject just hit the market. The 24,000-square-foot development site known as World Center Link is at 33-55 Northeast 6th Street. Colliers International South Florida’s Mika Mattingly, Jack Lowell and Cecilia Estevez are the listing agents. [TRD]

Rating agencies have had doubts about WeWork for years. In an analysis of two dozen CMBS ratings reports for properties across the country, TRD found that those rating agencies have increasingly viewed WeWork, and co-working tenants in general, as a negative in their risk assessments. Meanwhile, landlords largely continued to focus on the company’s positives in public statements. [TRD]

One in four condos in New York City are sitting vacant, according to a new report. The study found that of the 16,200 units completed in New York City since 2013, around 4,100 are still on the market. It’s pushed developers to lower prices and offer concessions. And practices from previous real estate cycles are resurfacing, like the bulk sale of unsold units to investors, converting condos into rentals and more. [NYT]

CBRE group subsidiary Hana has opened three co-working locations in London. The locations will host 500 CBRE employees. Hana will partner with Nuveen Real Estate at one flexible working location, LGIM Real Assets at another and Oxford Properties at their third location. [Press release]

Bill Cunningham and Julian Johnston with the Miami Beach skyline (Credit: iStock)

Bill Cunningham and Julian Johnston with the Miami Beach skyline (Credit: iStock)

Top Miami Beach broker joins Corcoran Group. The Corcoran Group is officially in the Miami market, and it’s hiring a top Miami Beach broker, Julian Johnston. Johnston, who had been in talks with the brokerage for months, was previously working for himself as broker and owner of Calibre International Realty. [TRD]

Terranova scores first approval for 7-story hotel on Miracle Mile. The Coral Gables Planning and Zoning Department gave initial approval for Terranova Corp.’s plans to build a 120-room hotel on Coral Gables’s Miracle Mile, according to the Miami Herald. [Miami Herald]

We Company plans to list shares on Nasdaq. WeWork’s parent company is planning to list its shares on Nasdaq, while also announcing changes to its governance structure that would restrict We Co-founder and Chief Executive Adam Neumann’s voting power. [WSJ]

Compiled by Keith Larsen

Jeffrey Soffer taps ex-Turnberry CEO to lead resi division, PMG and Greybrook big loan for co-living tower: Daily digest

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 5:30 p.m.

James Harpel and The Bristol in West Palm Beach

James Harpel and The Bristol in West Palm Beach

Edgewater developer snagged a condo at The Bristol in West Palm Beach. James Harpel, who is a partner at Eastview Development, bought unit 1204 at the luxury condo development at 1100 South Flagler Street from the development group. [TRD]

Jeffrey Soffer taps ex-Turnberry CEO to lead resi division at his new company. In March, brother and sister duo Jeffrey and Jackie Soffer officially split up their interests in Turnberry Associates. Jeffrey left to launch Fontainebleau Development, and has hired Bruce Weiner, a man he once sued. [TRD]

South Florida Logistics Center

South Florida Logistics Center

JPMorgan buys an Amazon-leased warehouse next to Miami International Airport. Fueled by growth in the e-commerce sector, South Florida’s industrial market isn’t showing signs of slowing down. And when Amazon is the tenant, it’s a seller’s market for a company looking to unload that property. [TRD]

Brookfield, RXR are among major companies urging action on gun violence. Some of the country’s biggest landlords and developers have thrust themselves into perhaps the most contentious national debate: gun control. [TRD]

PMG and Greybrook land $162M loan for a downtown Miami co-living tower. Kevin Maloney’s Property Markets Group and Greybrook Realty Partners closed on a $161.5 million loan for a rental tower it’s planning in downtown Miami. [TRD]

Babylon Apartments and Francisco Martinez-Celeiro (Credit: Google Maps and Wikipedia)

Babylon Apartments and Francisco Martinez-Celeiro (Credit: Google Maps and Wikipedia)

Showdown in Miami? A former Spaghetti Western star has lost his final battle with the Miami City Commission. The commission did not override Mayor Francis Suarez’s veto. The veto prevents developer Francisco Martinez-Celeiro from securing the rezoning of the former Babylon Apartments to allow for a 24-story residential building. [TRD]

Forever 21 may be winding down, but Old Navy is only getting bigger. Fashion retailer Old Navy said it planned to open 800 new stores over an unspecified period as it prepares to split with Gap, its parent company. Old Navy has been outperforming its sister companies, Gap and Banana Republic. [WSJ]

Blackstone says it has closed a $20 billion fund — the largest in real estate history. The company surpassed its own record of $15.8 billion, which it set in 2015. Blackstone has earned itself a reputation for bringing in double-digit returns on its “opportunistic” funds. [WSJ]

President Trump wants to the Fed slash interest rates below zero. He tweeted Wednesday that the Fed should slash interest rates to zero or below, raising questions about how negative rates would work, and what they would do for the economy. [NYT]

Miami Beach claims over 7 percent of its stores are vacant. With about 7.4 percent of the city’s commercial spaces vacant, the city will seek to beautify buildings with empty shops. A July survey found 117 empty storefronts in Miami Beach. In the second quarter of this year, the city’s retail vacancy rate rose slightly by 1.7 percent year over year. [Miami Herald]

Greg Pinkalla and ORA Flagler Village Apartments (Credit: Google Maps)

Greg Pinkalla and ORA Flagler Village Apartments (Credit: Google Maps)

Fairfield Residential sells new Flagler Village apartments for $92M. Amid a growing influx of high-end apartments in Fort Lauderdale, a company tied to a former Silicon Valley executive bought a new 292-unit apartment complex in Flagler Village for $92 million, or about $315,000 per unit. [TRD]

Orlando Padron picks up Regency hotel near the airport. A company tied to the Miami investor has acquired a 3.8-acre hotel property near Miami International Airport and David Beckham’s planned soccer and retail complex. OPB Capital Group Fund 1 LLC paid $25.8 million for the Regency Miami Hotel at 1000 Northwest 42nd Avenue. [TRD]

Compiled by Keith Larsen

Developers clear first hurdle in massive casino redevelopment, FPL fuels up with Homestead farmland for natural gas facility: Daily digest

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 9 a.m.

Rendering of the project (Credit: Point Publications)

Rendering of the project

Cordish Companies and partner plan redevelopment of casino and horse racing track in Pompano Beach. Pompano Beach city commissioners granted the first approval to a land-use change that would more than triple the maximum number of residential units on the Isle Casino Racing Pompano Park. [TRD]

FPL buys 109 acres near Homestead for natural gas facility. Florida Power and Light bought 109 acres near Homestead for $9.8 million where its affiliate natural gas company plans to build a nitrogen gas plant. [TRD]

Turnberry Ocean Club condo tower scored a $460 million refinance. Jeffrey Soffer’s Fontainebleau Development secured a massive refinance of its Turnberry Ocean Club, a 54-story condo tower under construction in Sunny Isles Beach. JPMorgan Chase and Mack Real Estate Credit Strategies are the lenders. [TRD]

Forever 21 is planning to file for bankruptcy as soon as Sunday. The retail chain could close as many as 700 stores in such an event, bringing an end to months of hemorrhaging money while it struggled to secure a loan. [WSJ]

Benderson CEO Randy Benderson and 1635 Northwest 107 Avenue

Benderson CEO Randy Benderson and 1635 Northwest 107 Avenue

Benderson Development scoops up Toys “R” Us property in Doral. The University Park, Florida-based real estate investment company purchased the parcel to a Toys “R” Us and Babies “R” Us in Doral for $5.3 million from Pacific Equities Capital Management. [TRD]

Billionaire Ken Griffin’s massive Palm Beach holdings now total $350M. Hedge funder Ken Griffin’s recent $99 million purchase of a Palm Beach estate highlighted his insatiable appetite for ultra-luxury homes, but it also added to his growing collection of properties in one of South Florida’s glitziest towns. [TRD]

Amid growing demand for university housing, Adam America buys a multifamily complex near FIU. Developers are increasingly seeking to build new upscale student living next to Florida International University as demand for that kind of housing grows. [TRD]

Adam Neumann (technically) lost $10 billion. The WeWork founder’s 22 percent stake was reportedly pegged as high as $14 billion earlier this year. But after a rocky path to the company’s IPO, its valuation has plummeted, and Neumann’s stake is now worth closer to $3 billion. [Bloomberg]

Low rates are increasing loan enthusiasm. Mortgage applications jumped 2 percent last week, compared with the previous week, and remained 69 percent higher than the same week last year. Interest rates are also down slightly; the average contract interest rate for a 30-year fixed rate mortgage with conforming loan balances dropped to 3.82 percent from 3.87 percent over the week. [CNBC]

Anbang’s Andrew Miller with Fairmont Chicago and JW Marriott Essex House on Central Park South (Credit: Wikipedia)

A fraudulent deed complicated Anbang’s $6 billion hotel sale. Anbang has sold its U.S. hotel portfolio to the highest bidder at a price north of $5.8 billion, but a last-minute wrench was thrown into the deal when the Chinese insurance conglomerate discovered six of the properties’ deeds were fraudulently transferred to limited liability companies, the Wall Street Journal reported. [TRD]

The Wynwood property and David Edelstein

The Wynwood property and David Edelstein

The owner of W South Beach buys up more land for Wynwood residential project. TriStar Capital’s David Edelstein paid $6.5 million to add a chunk of land to his growing assemblage along a booming stretch of Wynwood. He plans to develop the site into a residential building with about 365,000 square feet of space and up to 370 units. [TRD]

SoftBank is looking to use its leverage to call off WeWork’s planned IPO. SoftBank is urging WeWork’s parent company to shelve its IPO plans as the Japanese conglomerate tries to raise $108 billion for a second Vision Fund. It could struggle to attract major investors if the firm’s initial $100 billion Vision Fund is hurt by a poor performing investment in WeWork. [TRD]

Palm Beach condos shut off power as Hurricane Dorian approached. Some Palm Beach condominium buildings turned off their power after an evacuation was issued from Hurricane Doraine, leaving residents to endure miserably hot conditions. [Palm Beach Daily News]

Compiled by Keith Larsen

Bizarre case of deed fraud complicated Anbang’s $5.8B hotel portfolio deal

Anbang’s Andrew Miller with Fairmont Chicago and JW Marriott Essex House on Central Park South (Credit: Wikipedia)

Anbang’s Andrew Miller with Fairmont Chicago and JW Marriott Essex House on Central Park South (Credit: Wikipedia)

It might have been one of the biggest heists of all time.

Anbang has sold its U.S. hotel portfolio to the highest bidder at a price north of $5.8 billion, but a last-minute wrench was thrown into the deal when the Chinese insurance conglomerate discovered six of the properties’ deeds were fraudulently transferred to limited liability companies, the Wall Street Journal reported.

The deal with the buyer, South Korea’s Mirae Asset Global Investments, was due to close last month but was delayed due to fake deeds that transferred the ownership of six of the properties to unidentified limited liability companies. (One was reportedly called Andy Bang LLC.)

The fraudulent transfers were discovered as part of a routine search and sources told the Journal that Anbang had no knowledge of the transactions. The six properties found with fake deeds were all located in California.

Anbang, which has been selling off its holdings in the U.S. since its former chairman was sent to prison last year, began accepting bids for its hotel portfolio earlier this spring. Other bidders included Brookfield Asset Management, Fortress Investment Group and Blackstone Group. The Waldorf Astoria in New York, which is also owned by the insurer and is partly being converted into condos, was not included in the sale. [WSJ] — Erin Hudson

Partner at Miami law firm resigns amid conflict of interest allegation tied to zoning issue, Redfin will disclose commissions in this US city: Daily digest

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 5:30 p.m.

Greenspoon Marder partner William Riley Jr., who was representing the controversial Centner Academy in the Miami Design District, resigned from the law firm. Mayor Francis Suarez is of counsel at Greenspoon Marder, which no longer represents the private school. Neighbors who are challenging the site’s recent zoning change recently alleged that the property owners’ law firm presented a conflict of interest for the city as they fight the appeal. [DBR]

Redfin plans to disclose broker commissions on all Seattle listings — for both the buyer’s and seller’s agents. The discount firm will do so starting Oct. 1, when the Northwest MLS will also allow 30,000 agents and brokers to publish how much sellers pay the buyer’s broker. The change was announced in July. Last week, Redfin said it would disclose how much it pays buyers’ agents in an effort to be more transparent. “My experience is that when one MLS makes a shift like this others will follow suit,” Kelman told Inman. [Inman]

HS Residential Ernesto Lopes and the Deering Groves,

HS Residential Ernesto Lopes and the Deering Groves,

The largest homebuilder in Brazil is looking to invest more than $200 million in AHS Residential, a South Florida multifamily builder. MRV Engenharia E Participacoes S.A. plans to acquire a 50 percent stake in AHS Residential, which will allow the company to expand and develop more apartment buildings throughout South Florida. [TRD]

Though Hurricane Dorian didn’t make landfall in South Florida, it heightened concerns for real estate buyers and brokers, who saw the catastrophic damage that it caused in the northern Bahamas. Brokers in South Florida say the once-Category 5 hurricane won’t have a lasting impact on buyers and sellers’ minds. But the hurricane, which hit the Abaco Islands and Grand Bahama on Labor Day weekend, killing at least 30 people and destroying entire communities, is giving some buyers and sellers pause. [TRD]

Alexandra Lalos and Max Comess

Alexandra Lalos and Max Comess

Two former HFF hotel brokers found a new home in Miami, after being courted by competing firms. Max Comess and Alexandra Lalos joined Hodges Ward Elliott to launch the Atlanta-based real estate firm’s Miami office. JLL closed on the $2 billion acquisition of HFF in July. HWE will open a brick-and-mortar location in downtown Miami or Brickell and plans to hire brokers focused on the hotel, general commercial real estate and financing parts of the business, Comess said. [TRD]

Miami-Dade County gave the initial OK to set aside about $645 million for housing in the mayor’s budget, but residents weren’t too happy. That would mean the housing budget is up 15 percent compared to this year’s budget, ending at the end of the month, according to the Miami Herald. At a county commission meeting that ended after 10 p.m. on Thursday, in response to affordable housing advocates’ frustrations with the how long it takes the county to get housing projects built, Commissioner Eileen Higgins said that “ actually getting the money spent is part of what we need to do, rather than just getting it in the budget.” [Miami Herald]

Real estate isn’t doing as well as the broader market (Credit: iStock)

In the three days since the markets opened after the final long weekend of summer, real estate stocks have bumped up marginally. The increase trailed that of the broader S&P 500, according to an analysis of 28 real estate stocks by TRD. The S&P 500 since Tuesday morning increased about 2.3 percent, with a boost on Thursday amid, once again, news of trade negotiations between the U.S. and China, and news that the Federal Reserve will likely cut its benchmark interest rate by just 25 basis points later this month. [TRD]

Urbanica The Hotels is hosting a Bahamas Hurricane Relief BBQ on Friday to collect donations for those impacted by Hurricane Dorian. Proceeds from the event, hosted at the Meridian Hotel in Miami Beach from 6 p.m. to 8 p.m., will go to the Global Empowerment Fund. Brokerages in South Florida have also been collecting donations for victims of the hurricane.

Fannie Mae and Freddie Mac aren’t going anywhere yet. The U.S. Treasury Department released its housing reform plan yesterday and, based on the report’s language, it seems that mortgage guarantors Fannie Mae and Freddie Mac are not getting out from under the government’s thumb anytime soon. Though the Trump Administration has recommended recapitalizing the companies and giving them independence, a clear plan for getting them the funds is vague. [WSJ]

Dwellowner’s Eric Eckhardt (Credit: iStock)

Former Purplebricks executive Eric Eckardt is seeking up to $10 million to help grow Dwellowner, a cloud-based discount brokerage, via a security token offering. An unnamed investor has already committed to chipping in $3 million, Eckardt said in a video posted to Dwellowner’s website this week. Eckardt left Purplebricks in February, which has since experienced massive losses and pulled out of the United States and Australia. [TRD]

Compiled by Katherine Kallergis

WeWork’s plunging valuation could spell concern for other real estate startups

Adam Neuman and Masayoshi Son (Credit: Getty Images)

Adam Neuman and Masayoshi Son (Credit: Getty Images)

Since the start of 2019, WeWork’s lofty $47 billion has been a fixture of fascination — how could an unprofitable startup be worth more than 15 times its revenue?

Believers of that stratospheric valuation got a reality check this week when reports emerged that WeWork’s parent company was considering halving its valuation to around $20 billion for its impending public offering.

For other real estate tech startups that are yet to turn a profit but have generated hype by achieving valuations linked traditionally to pure-play tech companies, WeWork’s valuation chop could spell trouble.

“We’ve learned this lesson several times through 2019 IPOs, and it looks like we are learning it again: The public markets don’t have appetite for companies that lose a lot of money,” said Brad Hargreaves, the CEO of co-living startup Common.

WeWork’s unprecedented valuation, driven by gargantuan investments from Japanese conglomerate SoftBank, has created a schism in the proptech sector, where some reject the premise that the startup is a tech company at all, and therefore should not be valued like one. (IWG, a publicly-traded company formerly known as Regus, has a similar number of desks as WeWork, but has a market capitalization at $4.6 billion.)

“At its core, [WeWork] is a property company, not a tech company,” said Jeff Berman, a general partner at Camber Creek, a venture capital firm that has invested in more than two dozen real estate tech startups. “And it should be valued accordingly.”

When considering if a startup is a tech company, Berman said companies are split into two categories: those that use tech to enable a service (a tech company), and those that use tech to complement a service (not a tech company.)

By this metric, some observers have questioned if other real estate startups are deserving of their valuations. For example, Knotel, which also provides office and meeting space, claimed last month it was valued more than $1 billion following a $400 million funding round. Reached for comment, its chief executive Amol Sarva wrote in a statement that Knotel has “100-500x growth potential in the coming decades,” and added that “at the right time we too will be public.” He did not address questions about whether the firm’s valuation would be affected by WeWork’s.

Industrious, an office-space firm that enters management agreements with landlords, last month raised $80 million and is also valued at multiples of its revenue. Its CEO, Jamie Hodari, viewed WeWork’s prospective valuation cut as a major plus for the industry.

“There are a small number of WeWork investors to whom a valuation of low $20 billion would be upsetting,” Hodari said. “But for the industry and adjacent industries, that’s north of 6 or 7 times revenue — that is a tech multiple… a healthy multiple.”

He added that WeWork’s valuation would not have “an affect on our valuation in a positive or negative way.”

The co-living sector has also seen the rise of real estate startups valued like tech companies. Like co-working, co-living firms lease space, and sublease it at a premium.

Common’s Hargreaves dismissed the notion that a drop in WeWork’s valuation would affect his company’s value. His New York-based company, which is valued somewhere below $500 million, has raised $63 million in venture capital funding. In pitch decks, Hargreaves said he compared Common to other hospitality companies, like hotel chains, rather than WeWork.

There are plenty of reasons for investors to be wary of tech startups with high valuations. A study from the National Bureau of Economic Research found that more than 100 unicorn startups — those valued at more than $1 billion — were overvalued by 50 percent on average in 2017.

SoftBank and its fabled Vision Fund has played an integral role in ballooning the valuations of real estate and construction startups, including brokerage Compass, construction company Katerra and home-flipping startup OpenDoor. Each have valuations akin to tech companies, which typically achieve high valuations due to a combination of limited costs and the prospect of mass-adoption.

Katerra, a SoftBank-backed construction company that uses technology to streamline the design and production process, has raised more than $1 billion in funding and is said to be valued at more than $4 billion. The company, which this week announced two new acquisitions, declined to answer questions about whether changes to WeWork’s valuation would affect its own.

Compass, a New York-based firm that has disrupted the brokerage industry, uses technology to provide services and arm agents with better back-end tools. After raising $370 million in its latest funding round, the brokerage said it was valued at $6.4 billion. Compass has also said it doesn’t plan to turn a profit for the foreseeable future. The firm, led by Robert Reffkin, declined to provide commentary on its valuation, and if WeWork’s move would affect it.

According to Clelia Warburg Peters, co-founder of startup accelerator MetaProp, WeWork’s plunging valuation came down to company-specific issues.

“People that aren’t looking below the surface could take this as a sign signifying something related to proptech,” she said. “Primarily, this is commentary about WeWork, not proptech generally.”

But, she added: “It’s never good for any venture-backed company that’s received a ton of funding when venture-backed IPOs are not popping in the way they’d hoped.”

Batmasian buys Deerfield Beach retail property, the Fed gears up for another rate cut: Daily digest

A daily roundup of South Florida real estate news, deals and more for Sept. 5, 2019

September 05, 2019 06:20PM

Every day, The Real Deal rounds up South Florida’s biggest real estate news, from breaking news and scoops to announcements and deals. We update this page throughout the day. Please send any tips or deals to [email protected]

This page was last updated at 6:15 p.m.

James Batmasian and Trail Plaza in Deerfield Beach (Credit: Google Maps)

James Batmasian and Trail Plaza in Deerfield Beach (Credit: Google Maps)

James Batmasian, one of Boca Raton’s largest commercial property owners, picked up a retail center in Deerfield Beach for $16.5 million. Batmasian’s Investments Limited bought the property by taking control of the LLC of the property’s seller, rather than through a deed, according to a spokesperson from Investments Limited. James Case of Fort Lauderdale sold the property. [TRD]

The Fed is gearing up for another rate cut. The Federal Reserve is reportedly planning another rate cut — likely to be a quarter percentage point — as Donald Trump’s trade war continues to escalate. [WSJ]

If Allergan CEO Brenton Saunders could turn back time, would he still buy a luxury Palm Beach Gardens home last year, only to sell it for less than a year later for a loss? Saunders, who works for the company that manufacturers drugs like Botox, Restasis, CoolSculpting, Juvederm and Lo Loestrin Fe, sold the waterfront six-bedroom, 7,522-square-foot house at 14630 Watermark Way for nearly $6.5 million. He and his wife, Amy, paid $6.6 million for the home nearly a year ago [TRD]

President Trump has released plans to revamp the housing market. A new plan unveiled by the Trump administration on Thursday includes almost 50 proposals to remake the housing market — and could see the end of more than a decade of government control over Fannie Mae and Freddie Mac. [WaPo]

509 Collins Avenue and brokers Gabriel Britti, Ricardo Esteves and Ronnie Issenberg (Credit: Marcus & Millichap)

509 Collins Avenue and brokers Gabriel Britti, Ricardo Esteves and Ronnie Issenberg (Credit: Marcus & Millichap)

Investor Sam Herzberg sold a Walgreens-leased property on the corner of Collins Avenue and Fifth Street in Miami Beach to Allied Partners for $33 million. Herzberg sold the two-story 22,875-square-foot building at 509 Collins Avenue. Walgreens has more than 14 years left on its triple-net lease with rare rental increases, plus extension options, according to Marcus & Millichap. The Commercial Observer first reported the sale to Allied Partners. [TRD]

WeWork is considering slashing its valuation to $20B. After weeks of criticism over the company’s business model, its parent the We Company is reportedly considering delaying its planned IPO and slashing its valuation to $20 billion. [TRD]

Macy’s will update 100 stores nationwide, including 10 in Florida. The renovations are part of the retailer’s Growth 150 initiative, which includes adding new floors, restrooms, fitting rooms, a designated in-store online pickup spot, and new and expanded departments, according to the Business Journals. In South Florida, there are seven stores that will be upgraded: at Town Center at Boca Raton, Galleria in Fort Lauderdale, The Gardens in Palm Beach Gardens, Dadeland Mall, Mall of Millenia, Broward Mall and Wellington Green. [Cincinnati Business Courier]

An aerial view of damage caused by Hurricane Dorian in the Bahamas (Credit: Getty Images)

An aerial view of damage caused by Hurricane Dorian in the Bahamas (Credit: Getty Images)

As the Bahamas begins its long recovery process after Hurricane Dorian ravaged Grand Bahama and the Abaco Islands, the country faces an uphill battle rebuilding hotels and its tourism industry. The hurricane, fortunately, missed the country’s capital city Nassau, along with Paradise Island, where the largest resorts and hotels are located, including Baha Mar and Atlantis, Paradise Island. But the Abaco Islands and Grand Bahama have a total of about 2,250 hotel rooms, which equates to 15 percent of the total hotel inventory in the country, according to Newton. [TRD]

Here are 5 takeaways from The Real Deal’s deep dive into Eklund-Gomes’ national expansion. Over the past 24 months, the star Douglas Elliman team has been in expansion mode, adding four new offices in three U.S. cities and growing its team from nine agents to more than 64. It doesn’t plan to split with the company. One takeaway from TRD’s cover story? Co-listing and referral fees factor into Miami and L.A. growth. [TRD]

Compiled by Katherine Kallergis