Off the grid: Developers eye “virtual power plants” for properties

Rendering of Sonnen's ecoLinx home battery (Sonnen)

Rendering of Sonnen’s ecoLinx home battery (Sonnen)

A growing number of developers in the U.S. are investing in integrated solar power and battery systems for their buildings.

Advances in energy storage technology and falling prices for batteries mean these “virtual power plants” are becoming viable for a variety of buildings and uses, according to the New York Times. The technology would also create more energy independence, coming at a time when severe weather — like last month’s deep freeze in Texas that cut power to millions — has wreaked havoc on residents.

Developer Wasatch Group installed storage batteries in each of its 600 units at the firm’s “net zero” Soleil Lofts project in Herriman, Utah. The systems store energy created by solar arrays on the property, making the complex one of the better examples of using integrated power.

Collectively they can provide 12.6 megawatt hours of backup power for the building, and currently offset the costs of powering common areas, according to the report. Wasatch also signed a deal with Rocky Mountain Power that allows the energy company to tap the batteries at Soleil Lofts for power. Residents save around 30 to 40 percent on their energy bills, the Times noted, citing Wasatch.

Other developers are also exploring storage systems. Meritage Homes has demonstration projects across the U.S. to explore green tech. Related Companies installed a 4.8-megawatt battery at the Gateway Center retail complex in Brooklyn that’s used by energy company Enel X.

In New York City over the last few years, there have been several thousand solar panel installations in Brooklyn alone.

Some governments have pushed for more energy storage projects. In 2019, New York State created up to $55 million in incentives for commercial and residential storage projects on Long Island.

[NYT] — Dennis Lynch

Phat flat: Hedge funder nears deal for $153M London penthouse

Suneil Setiya and the One Hyde Park complex (Photos via Wikipedia Commons/Rob Deutscher and Synergos)

Suneil Setiya and the One Hyde Park complex (Photos via Wikipedia Commons/Rob Deutscher and Synergos)

Hedge fund billionaire Suneil Setiya is said to be in talks to buy a massive London penthouse for around $153 million.

The 14,000-square-foot unit that the Quadrature Capital founder is eyeing is located in the luxury residential complex known as One Hyde Park, according to Bloomberg. The unit has no internal walls and is completely unfinished, making its price tag all the more jaw-dropping. The deal would be one of the priciest residential sales to close in the United Kingdom, and the fourth largest to close above 100 million pounds in the last year or so, according to the report.

Billionaire Cheung Chung Kiu spent 210 million pounds on a massive estate in Hyde Park early last year. And in November, an unknown buyer spent 147 million pounds  on three units at No. 1 Grosvenor Square, a former U.S. embassy in the city.

The would-be seller of the One Hyde Park property is Hasan Ismaik, former CEO of Dubai-based construction firm Arabtec Holdings. Arabtec went into liquidation last year.

One Hyde Park sits across from its eponymous park in Knightsbridge. It was developed by Christian Candy’s CPC Group and a company controlled by former Qatar Prime Minister Sheikh Hamad bin Jasim bin Jaber Al Thani and completed in 2009. There are 86 residential units and three retail stores.

Candy’s brother, Nick also owns a penthouse at the complex, which is valued at 160 million pounds.

Overall, London home prices keep ticking up. The average price of a home in the city rose nearly 10 percent between November 2019 and November 2020, to about 514,000 pounds, or just over $700,000. Demand has also been high during the pandemic for properties in suburban and rural areas that offer space and privacy.

[Bloomberg] — Dennis Lynch

Legal battle erupts over BH3’s public-private Delray Beach project inside Opportunity Zone

BH3 co-founders Daniel Lebensohn and Greg Freedman (BH3, iStock)

BH3 co-founders Daniel Lebensohn and Greg Freedman (BH3, iStock)

A public-private partnership between BH3 and the Delray Beach Community Redevelopment Agency to redevelop 6.17 acres of prime downtown land is collapsing over delays and changes to the developer’s original proposal.

Aventura-based BH3, led by principals Dan Lebensohn and Greg Freedman, sued the CRA on Friday for breach of contract, after the agency’s board began the process to scuttle the deal in late January.

“To our surprise, what was supposed to be a procedural vote to grant variances and an amendment for more time to have everything approved, the CRA board reversed course for some reason unknown to us,” Freedman told The Real Deal. “We have been asking for more time since March because of Covid. We have tried to acquiesce and work with them. When they reversed course on us, they left us no choice but to really go on offense.”

Kim Phan, the CRA’s legal advisor, said the agency declined comment, citing the pending lawsuit.

Adam Frankel, a Delray commissioner who serves as CRA vice-chairman, disputed Freedman’s characterizations. “From my perspective, BH3 promised a project that would be a true destination on West Atlantic Avenue,” Frankel said. “They sought to change that original project in a vast and material way. The fact is that BH3 has done minimal to no work in starting construction of this project, which has been a very large disappointment to all of us here in the city of Delray Beach.”

The site is within an Opportunity Zone on the 600 to 800 block of West Atlantic Avenue, where BH3 had proposed AltaWest. It would have entailed 43,000 square feet of ground-floor retail, 21,600 square feet of professional office space, a 33,000-square-foot grocery store, 165 residential units totaling 272,242 square feet, 744 parking spaces, about 45,000 square feet of public space called “Frog Alley” and up to 30 workforce housing units, the latter of which included 18 affordable housing units recently completed on an adjacent site.

Since the CRA approved a sale and purchase agreement with BH3 in April 2019, the project has changed substantially.

It is now called Fabrick, and the number of residential units were reduced to 65 apartments and four townhouses, all of which would be workforce and affordable housing, according to Freedman and documents submitted to the CRA. In addition, BH3 wants to reduce the square footage of the retail and green space, as well as build a surface parking lot instead of placing a parking structure on top of the grocery store.

According to the complaint, BH3 spent more than a year searching and holding discussions with potential grocery tenants, and signed a “non-binding, but heavily negotiated” letter of intent on Oct. 12 with a national chain. Freedman said the company is Publix.

BH3 claims that the pandemic prolonged the negotiations and responses to design and tenant requirements, because Publix was dealing with issues pertaining to its supply chain, logistics, employee health and other related factors, and the ongoing, general state of emergency.

The project’s design was revised to further reduce density and intensity after BH3 conducted outreach efforts with Delray Beach residents, who were “clearly not desirous of BH3 or any
developer gentrifying the neighborhood with a monstrous project that had market rate housing,” according to the lawsuit. Publix also required that BH3 build a surface parking lot instead of a garage.

Amid all this, BH3 faced a Jan. 18 deadline to have its site plan approved or be considered in default. So the developer sought approval to negotiate an extension and for the design changes, which the CRA board initially accepted at its Dec. 17 meeting in a 5-2 vote, the lawsuit states.

But at its Jan. 26 meeting, the CRA rejected project variances and the extension, despite BH3 offering to compensate the city by increasing its $250,000 deposit to $1 million and to pay $200,000 to the city’s parking trust fund, according to the complaint.

The lawsuit and Freedman contend the CRA should have granted the extension due to delays caused by Covid-19 and not the developer. “At the end of the day we wish we weren’t here,” Freedman said. “We think they have erred in their judgment. We look forward to that being corrected. We want to charge forward with this project.”

Frankel said the CRA went above and beyond in trying to work with BH3 to start construction. “The fact is that BH3 is trying to use Covid as an excuse, and I find that to have little to no merit,” Frankel said. “BH3 has done nothing to try and salvage this as of this time.”

Opendoor revenue plunged 45% in 2020

Opendoor CEO Eric Wu (Opendoor, iStock/Illustration by Alexis Manrodt for The Real Deal)

Opendoor CEO Eric Wu (Opendoor, iStock/Illustration by Alexis Manrodt for The Real Deal)

In its first earnings as a public company, Opendoor reported a 45 percent drop in revenue attributed to its pause in home-buying in the early months of the pandemic.

The iBuyer generated $2.6 billion in revenue last year, compared to $4.7 billion in 2019. The company reported a net loss of $286.8 million, down from $339.2 million a year earlier.

Even as it sought to rebuild its inventory during the fourth quarter, it had few homes to sell and quarterly revenue was $248.9 million, down 80 percent from $1.3 billion in 2019. Opendoor’s net loss for the fourth quarter was $87.8 million compared to $91.7 million.

During its earnings call Thursday, CEO Eric Wu acknowledged the toll the pandemic took on its home-buying operation. Opendoor sold off an estimated $1 billion worth of inventory last year amid uncertainty in the market. It has since rebuilt its inventory to 1,827 homes valued at $466 million.

Notwithstanding the turbulence of 2020, Wu said Opendoor is poised to benefit from the U.S. housing boom and adoption of digital home-buying tools. “We’ve been building Opendoor behind the scenes for this moment,” he said. “The adoption of digital products is rising sharply; real estate is no exception.”

Founded in 2014, Opendoor is the leader in the nascent-but-growing iBuying sector. It makes cash offers for homes, providing sellers the speed and certainty of a transaction for a fee. Competitors in the space include Zillow, Offerpad and Redfin, among others.

Last spring, nearly all of the major iBuyers suspended home-buying, citing the difficulty in valuing homes during the early part of the pandemic. U.S. home sales have since rebounded, and 2020 home sales hit a 14-year high, according to the National Association of Realtors.

Opendoor went public in December after merging with a blank-check firm backed by investor Chamath Palihapitiya. The IPO valued Opendoor at $4.7 billion and generated net proceeds of $970 million. Opendoor later raised $860 million in follow-on equity.

The stock has bounced around over the past few months, however. Shares closed at $31.25 on Dec. 21, its first day of trading. The stock hit a high of $38.26 on Feb. 11. But the price closed at $24.39 per share on Thursday, down 15 percent from a day earlier.

During the earnings call, Opendoor said it plans to expand to 42 markets — twice what it has now — including six new markets during the first quarter of the year.

In addition to working with sellers, Opendoor recently launched a “cash offer” program that allows buyers to make cash offers backed by Opendoor. “We know the market is competitive,” Wu said. “This feature, and more to come, demonstrates our ability to innovate quickly based on what we’re seeing in the market.”

Asked during the call about Opendoor’s competition with Zillow, Wu replied that he’s focused on building a new sector.

TJAC Development sells mixed-use portfolio near Boca Raton for $155M

Stateland Brown owner-brokers Ayal Frist and Dan Statlander with one of the properties, City National Bank Plaza at 7000 West Palmetto Park (Google Maps)

Stateland Brown owner-brokers Ayal Frist and Dan Statlander with one of the properties, City National Bank Plaza at 7000 West Palmetto Park (Google Maps)

TJAC Development disposed of four mixed-use office and retail plazas west of Boca Raton for $155 million, marking one of the largest commercial sales in South Florida this year.

Weston-based Titan General Partners acquired the 515,000-square-foot portfolio by buying an interest in the four limited liability companies TJAC originated to own the properties, according to Boca Raton-based Stateland Brown co-owner Ayal Frist, who brokered the deal with brokerage co-owner Dan Statlander. No deeds were recorded.

The portfolio includes roughly 17 buildings interspersed along Powerline Road from Glades Road to Southwest 18th Street, Frist said.

Florida corporate records show Titan General, as well as Carlos Ulloa and Debra Corchia, who are affiliated with Titan, became managers of TJAC affiliates TJAC Boca Grove, TJAC Palmetto Park, Boca Wharfside and Boca Medical Plaza in late February.

Frist and Statlander said Bahamas-based investment manager Holdun also bought a stake in the properties. The brokers declined to say how Titan General and Holdun divided their interest in the properties.

TJAC, founded and led by the Schwarzman family and based in Boston, focuses on student housing and mixed-use retail properties, according to its website.

Frist and Statlander said they worked on behalf of TJAC to assemble the properties from 2012 to 2016. TJAC paid a total of $78 million.

The portfolio sale includes the seven-building Fountains Center, at 7000-7700 West Camino Real, which spans 15 acres. Built in 1978 and 1981, it includes a building with two banks and a medical office; two mid-rise office buildings; and four more buildings with a mix of office and retail. Property records show TJAC bought it for $16 million in 2012 from CB Camino Real.

The sale also includes the Grove Centre, at 21301 Powerline Road, which was built in 1983 on 3.5 acres. It has a one-story and a four-story office building. TJAC bought it for $11.5 million in 2016 from SF Partners, according to records.

Also, City National Bank Plaza, at 7000 West Palmetto Park, which includes a 132,598-square-foot, mid-rise office building with Starbucks and McDonald’s outparcels. The office building includes a City National Bank of Florida office, several medical offices and restaurant space. It was built in 1986 on 7.3 acres. TJAC bought it for $37.6 million in 2016 from 700 West Palmetto I, records show.

Lastly, the portfolio includes The Boardwalk at 18th Street, at 6853-6909 Southwest 18th Street, which spans 10 acres and overlooks a lake. It has several medical offices, as well as a Carrabba’s Italian Grill with lakefront dining. TJAC bought it for $13 million in 2013 when the plaza was called Wharfside Village Shopping Center.

TJAC renovated the properties over the years. Frist and Statlander leased vacant space on behalf of TJAC and increased occupancy by 60 percent, Statlander said. Rents are in the low $20s per square foot for offices and in the $30s per square foot for retail, he said.

The portfolio had a 92 percent occupancy when TJAC sold it, and maintained its occupancy throughout the pandemic, Frist added.

In January, the Related Companies closed on its $282 million purchase of the Phillips Point office towers in West Palm Beach, marking the largest office sale in South Florida in more than a year.

More recently, an office building in Boca Raton at 6700 Northwest Broken Sound Parkway sold for $6 million to an affiliate of private equity firm AE Industrial Partners LP.

Also, investor CA Ventures paid $80 million for an apartment complex at 135 Northwest 20th Street in Boca Raton.

States Title, now Doma, going public in $3B SPAC deal

States Title CEO Max Simkoff and investor Mark Ein. (Keystone Strategy, Getty)

States Title CEO Max Simkoff and investor Mark Ein. (Keystone Strategy, Getty)

Title insurance startup States Title is going public in a $3 billion deal with a blank-check firm, the latest sign of investor interest in companies that digitize the residential real estate industry.

The company — which has been renamed Doma — said Tuesday that it plans to merge with Capitol Investment Corp., a special purpose acquisitions company backed by investor Mark Ein. Since 2007, Ein has raised $1.5 billion through five SPACs.

The deal will generate $645 million, including a $300 million PIPE investment and $350 million from investors including BlackRock, Fidelity, the Gores Group, Hedosophia, SoftBank’s SB Management, Wells Capital and Zillow co-founder Spencer Rascoff. National homebuilding giant Lennar, already a big investor in States Title, is participating in the PIPE.

Doma will retain up to $510 million in cash proceeds, the companies said.

Founded in 2016, States Title took on the arcane world of title insurance by digitizing and streamlining the closing process. The company was last valued at $623 million after a $123 million funding round in May 2020 led by Greenspring Associates with participation from Foundation Capital and Fifth Wall Ventures.

Last month, States Title raised $150 million in debt financing from HSCM Bermuda.

The deal reflects both the liquidity available in the financial markets, which has resulted in the proliferation of real estate-focused SPACs, as well as the strength of the U.S. housing market, with January home sales up 23.7 percent year-over-year, according to the National Association of Realtors. With it, demand for digital tools to buy and sell homes has also surged.

“In 2020, adoption and usage of our core product exceeded our expectations,” founder and CEO Max Simkoff said in a statement.

To date, Doma has facilitated 800,000 closings for lenders including Chase, Homepoint, PennyMac and Sierra Pacific Mortgage.

After the Series C last year, Simkoff summed up his experience with the title insurance industry thus: “First they ignore you, then they laugh at you, then they fight you.”

“I’ve been told often that I speak ignorantly in this industry,” he said in a conversation with The Real Deal at the time. “Then it turns out the ignorant things I’m saying end up becoming more efficient ways of doing things.”

U.S. mall values fall 60% after appraisals

Many of the lower-tier malls that will be sold will likely be redeveloped into something else. (Getty)

Many of the lower-tier malls that will be sold will likely be redeveloped into something else. (Getty)

The suburban mall that you frequented as a teenager could now be worth substantially less than the dirt underneath it.

U.S. mall values declined 60 percent due to appraisals in 2020, according to an analysis by Bloomberg News. Across 118 shopping centers with commercial mortgage-backed securities loans, about $4 billion was lost after reappraisals caused by delinquencies, defaults or foreclosures.

The data suggests a grim outlook for many malls across the country as some of the largest mall owners, including Brookfield Property Partners and Simon Property Group, are increasingly walking away from underperforming properties and handing them over to their lenders.

In some cases, malls are being foreclosed on with almost no interest from outside investors. A recent foreclosure auction of a Simon mall outside of Atlanta yielded no bids despite a previous valuation of $322 million.

In Connecticut, a portion of a shopping center owned by Simon recently saw its value drop by 88 percent after an appraisal.

Many of the lower-tier malls that will be sold will likely be redeveloped into something else, according to industry experts.

“The orange tile and brown carpeting is just going to be torn down and plowed under and eventually trade at a price someone can build something else there,” Jim Costello of the research firm RCA told Bloomberg.

But it’s not just lower-tier malls that are in trouble: The valuation of Class-A malls fell by nearly half since 2016, according to a recent report by Green Street.

Mall traffic has dropped significantly across the U.S. because of Covid restrictions and consumer hesitation, which has accelerated the shift toward e-commerce that was already in place. Some retailers have also declared bankruptcy or stopped paying rent on their mall space, further squeezing operators.

[Bloomberg News] — Keith Larsen

Morgan Properties, Olayan America buy $1.75B multifamily portfolio

Mitchell Morgan and one of the properties (Morgan Properties)

Mitchell Morgan and one of the properties (Morgan Properties)

Morgan Properties and Olayan America have purchased a portfolio of 48 U.S. multifamily properties for $1.75 billion.

The seller was STAR Real Estate Ventures, a joint venture of El-Ad National Properties LLC and Yellowstone Portfolio Trust, according to a press release from Morgan and Olayan. It is Morgan’s largest acquisition since the Pennsylvania-based firm bought 95 multifamily properties for $1.9 billion two years ago.

The 48 properties have 14,414 units, including 2,566 outside Baltimore and 1,972 in the Tampa-St. Petersburg area.

The portfolio spans 11 states, including six where Morgan already owns multifamily properties: North Carolina, South Carolina, Illinois, Ohio and Maryland. The portfolio deal marks Morgan’s first acquisitions in Florida, Texas, Georgia, Louisiana and Michigan.

Morgan and Olayan plan to spend about $100 million on renovations and upgrades to the properties, the average age of which is 35 years.

Morgan Properties plans to open a regional office in Boca Raton, Florida, to help manage the portfolio. The acquisition also saw Morgan bring on 400 employees and create around 70 new corporate positions.

STAR Real Estate Ventures joins other multifamily landlords in offloading holdings recently. Radco has sold more than half of the 59 multifamily properties it has purchased over the last decade in order to build up some cash for what CEO Norman Radrow last fall called “a new and interesting cycle that will be coming next year.”

Return of the retailer: Century 21 relaunches

Century 21 president Marc Benitez (LinkedIn; iStock)

Century 21 president Marc Benitez (LinkedIn; iStock)

Attention shoppers: Century 21 is coming back.

The New York-based discount retail chain that built a loyal following but folded after declaring bankruptcy in September, announced its planned return last week.

In a statement on Tuesday, Century 21 Stores said the decision to relaunch came “in response to the outpouring of love from the Big Apple and the admiration” of their “loyal shoppers from around the world.”

The announcement was light on details, but the company said it would open its first store in South Korea this year. News about its New York and nationwide relaunch will follow in the coming weeks, the statement said.

The Gindi family, which started the brand in Bay Ridge, Brooklyn, in 1961, bought back the intellectual property at a bankruptcy auction in the fall.

The pandemic slammed into then upended the retail industry, forcing stores like Century 21 to shutter their locations nationwide. Retailers fell far behind on rent payments, with many shedding stores, and some declaring bankruptcy or getting acquired. When Century 21 filed for Chapter 11, it said it was forced to do so after insurers declined its business interruption insurance claims.

Last month, the retailer hired Marc Benitez as its president. Benitez spent nearly 14 years with the luxury goods brand Coach, and over three years with Kenneth Cole Productions. He also spent time as a vice president at Authentic Brands Group and CAA-GBG Global Brands Management Group. Benitez was a general manager at Century 21 from 1998 to 2001.

The Gindis weathered a tumultuous 2020. Two months after Century 21 declared bankruptcy, developer Ben Ashkenazy sued the family, claiming it diverted money from him and damaged his reputation. The Gindis have invested in some of Ashkenazy’s commercial properties. The family claims that Ashkenazy stole money from them.

Miami-Dade resumes pre-pandemic evictions after unannounced February break

Miami-Dade Mayor Daniella Levine Cava (Getty, iStock)

Miami-Dade Mayor Daniella Levine Cava (Getty, iStock)

Miami-Dade County resumed executing writs of possessions for residential eviction cases filed before the pandemic, following an unannounced month-long break.

The police execute writs of possession, evicting residents or businesses from their properties. The move follows a final judgment in a court case.

Homeowners with federally backed mortgages are protected from eviction until at least March 31, per a federal moratorium from the U.S. Department of Housing and Urban Development.

On Nov. 13, former Miami-Dade Mayor Carlos Gimenez directed the police department to begin enforcing writs of possession for all cases filed on or before March 12, when the mayor declared a state of emergency. The policy continued under incumbent Mayor Daniella Levine Cava, who took office days after Gimenez’s order.

But by early February, Miami-Dade Police paused the service of writs of possession as the mayor’s office looked to clarify the policy, according to a spokesperson. That temporary change in policy was not announced in writing. The break ended on Thursday, the spokesperson confirmed.

In a court filing dated Feb. 2 for a foreclosure case dating back to 2015, the lender cited an “oral directive” from the mayor that led to the police refusing to execute a writ of possession. That residential borrower, who was foreclosed on, was evicted on Thursday, according to her attorney, David Winker.

In a memo issued on Thursday, the mayor re-stated her policy on evictions. Miami-Dade Police will also remove non-tenants who are identified as squatters.

Earlier this month, the Miami-Dade County Commission approved Levine Cava’s $60 million relief program for residential landlords with pending writs of possession for tenants facing eviction. The program offers landlords back rent of up to $3,000 per month. At that press conference, Michael Liu, Miami-Dade’s public housing director, said the courts had issued up to 1,700 writs of possession which would be prioritized.

According to Miami-Dade Police, the department executed two commercial and nine residential writs of possession on Thursday. From Nov. 12 until Thursday, 324 writs of possession have been executed.