Developer startup favorite Honest Buildings acquired by software company Procore

Developer startup favorite Honest Buildings acquired by software company Procore

It is the latest sign of growing confidence in the construction-tech field

Honest Buildings CEO Riggs Kubiak and Procore CEO Tooey Courtemanche (Credit: Techstars and Procore)

Honest Buildings CEO Riggs Kubiak and Procore CEO Tooey Courtemanche (Credit: Techstars and Procore)

UPDATED, July 16, 1:50 p.m.: Construction management software company Procore has acquired Honest Buildings, a startup favored among institutional developers, the companies said Tuesday.

The acquisition signals confidence in the growing construction tech sector, where major real estate players are putting their capital. Last year, investment in construction tech companies totaled $6.1 billion, almost double what was invested in 2017 and a stark rise from the $350 million invested in 2016. Already, 2019 is on track for another year of record investment with over $4 billion so far.

Procore, which last year raised $75 million in a round led by Japanese conglomerate Tiger Global Management, sells an app used by developers to track a construction project’s progress.

In a statement, Procore’s chief executive and co-founder Tooey Courtemanche said Honest Buildings’ product — an online platform that uses data to allow developers to oversee projects — will be integrated into the Procore platform to provide transparency and accessibility of information to builders.

The firms would not disclose the acquisition price.

Courtemanche launched Procore in 2002 and has over 1,000 employees. It is now valued over $3 billion and has offices in multiple countries.

Honest Buildings, for its part, has drawn big checks from some of the real estate industry’s largest figures since it launched in 2012. The firm, led by Riggs Kubiak, has raised $47 million, in rounds that included the Durst Organization, Brookfield Asset Management and Oxford Properties. In turn, the firm counts those companies as customers.

Return to this page for updates.

Correction: This story has been updated to reflect that it was Tiger Global Management which led the $75 million funding round, not SoftBank.

North Miami investor aims for healthy returns on medical office properties

Allen Chelminsky bought two medical office buildings in Lauderhill for $5M

7100 West Commercial Boulevard and 7200 West Commercial Boulevard (Credit: Google Maps)

7100 West Commercial Boulevard and 7200 West Commercial Boulevard (Credit: Google Maps)

In life, three things seem certain: death, taxes and investor demand for medical office space.

A company managed by North Miami real estate investor Allen Chelminsky bought two medical office buildings in Lauderhill for $5 million, records show.

The 33,290-square-foot properties are at 7100 West Commercial Boulevard and 7200 West Commercial Boulevard. J & J Properties, managed by John Ekstrom of Coral Springs and Jeth Battisto of Boca Raton, sold the commercial development for $150 per square foot.

The Class B office development was built in 1985 and house doctors’ offices, records show. The properties were last purchased for $2.5 million in 2002, records show.

Chelminsky’s family owns a portfolio of apartment buildings throughout Miami-Dade County. In June 2018, Chelminsky sold an apartment and commercial complex at 14560 Northeast Sixth Avenue in North Miami, consisting of 82 apartments and a 15,000-square-foot commercial building, for $13 million.

A number of medical office buildings have traded hands in South Florida over the past few years for prices that are significantly above their last sale prices. Some of the demand could be due to the aging population of baby boomers who need more medical care. Medical office buildings are also seen as recession-proof and a safe bet for investors looking to buy real estate near the end of the cycle.

In May, the Toledo, Ohio-based investment firm Welltower purchased a 54,484-square foot medical office building at 2901 Coral Hills Drive in Coral Springs for $18.35 million.

New pastime for the rich and famous: “glamping”

New pastime for the rich and famous: “glamping”

Here’s why wealthy homeowners are spending $30,000 on tents

July 14, 2019 02:00PM
A glamping tent in Mount Maunganui, New Zealand (Credit: iStock)

Glamping is becoming increasingly popular among wealthy homeowners (Credit: iStock)

Wealthy homeowners are increasingly turning to a new form of getaway, and it doesn’t require them to leave their property.

Glamping — or glamorous camping — is becoming more and more popular among America’s wealthy, according to the Wall Street Journal. The high-end tents, which can sell for up to $30,000, even make a great guest home on some estates, homeowners told the Journal.

The increasing popularity of luxury camping has spawned a whole industry. Glamping Hub, an Airbnb-like service, has 21,000 hosts offering luxury camping on their properties. Luxury camping resorts are popping up in the West, and there’s a company, Under Canvas, that manages luxury campsites in eight national parks.

In New York, Terra Glamping this year is bringing an upscale campsite to the Hamptons, and another developer has raised funds to bring a similar setup to the Rockaways.

Glamorous camping is not necessarily a new concept, even if the word “glamping” only made it into the dictionary in 2016. In 1520, King Henry VIII of Britain and King Francis I of France set up in regal camps for a countryside jousting tournament. Ottoman Empire sultans were also known to bring “richly embroidered” tents to some excursions, including military campaigns, according to the Journal.

[WSJ] — Joe Ward

Developers land $74.5M loan for condo construction project at Ocean Reef Club

New York-based ACRES Capital made a two-year loan for construction of the 48-unit Residences at Ocean Reef

July 13, 2019 03:00PM

John Grunow Jr. and Ocean Reef Club

The developers of a condominium at the Ocean Reef Club near Key Largo borrowed $74.5 million to finance construction of the 48-unit project.

Long Island, New York-based ACRES Capital provided the construction loan for the condo project, called Residence Club at Ocean Reef.

The borrowers include John Grunow III and John Grunow Jr. of The Grunow Group and former Trammel Crow Residential executive Ronald Terwillger. Their partners in the project include Martin Levine of Redwood Real Estate Group.

Residence Club at Ocean Reef is designed as a three-building complex spanning 103,700 square feet at 1 Golf Village Drive at the Ocean Reef Club, a gated, 2,500-acre community just north of Key Largo.

Owners of the one-, two- and three-bedroom condo units will have access to the 18,000-square-foot private clubhouse at Ocean Reef Club and the community’s golf course and marina.

The developers have advanced the Residence Club at Ocean Reef, which would be built on the site of a 1970s condominium, despite initial opposition from eight owners of homes in the Ocean Reef Club community. [Commercial Observer]Mike Seemuth

Historic preservation board rejects Blue Road’s plans for South Beach hotel

“We’re trying to save the historic district, not block or restrict anything”: Jack Finglass

Marcelo Tenenbaum and Jorge Savloff with the current building next to a rendering of the project

Marcelo Tenenbaum and Jorge Savloff with the current building next to a rendering of the project

Blue Road’s plans to convert a 34-unit South Beach apartment building into a 116-room hotel hit a snag after the project failed to get the minimum votes needed from the Miami Beach Historic Preservation Board.

The board voted 4 to 3 this week to approve an amended version of Blue Road’s plans to turn the 61-year-old Park Terrace Apartments at 355 19th Street into the more contemporary Park Avenue Hotel.

However, because the building falls into a historic district, Blue Road needed five affirmative votes from the historic preservation board to obtain the demolition permits needed to move forward. Following the vote, the board “continued” the item until September 9th.

It’s the second time the project has been continued. The board previously continued the project at its May 14 hearing after board members expressed another set of concerns over the proposed hotel’s design.

“They have to do their job. We have to do our work. We will find a compromise,” Marcelo Tenenbaum, a principal of Blue Door, told The Real Deal after the vote.
The project’s architect, Luis Revuelta of Revuelta Architecture International, admitted he was surprised.

“I think we came today with a high level of confidence that we were going to get approved,” Revuelta said.

But the three dissenting board members — Nancy Liebman, Jack Finglass, and Kirk Paskal — expressed concern that not enough of the original 1951 post-World War II structure was being preserved or utilized in the new hotel’s design. Under the project’s latest plans, 70 percent of the original building would be demolished.

“This is something I would expect from a more, non-historic district,” Paskal said. “A way to pay homage to something by leaving a little piece.”

Tenenbaum and Blue Road co-principal Jorge Savloff paid $14.27 million for the two-story, 22,000-square-foot apartment building in March 2018. The structure is two blocks away from the newly renovated Miami Beach Convention Center as well as the site of a future 800-room Miami Beach Convention Center Hotel that will be co-developed by David Martin and Jackie Soffer.

Revuelta presented plans for a five-story 44,466 square foot complex that included a rooftop pool deck and two outside elevator towers. It was a smaller version than what was proposed in May, and now includes a garden courtyard instead of a below grade parking area. The remnants of the original apartment building would be transformed into a hotel lobby and gym.
Liebman disapproved of the design, saying that it didn’t belong in a historic district. She also ridiculed the notion that a 116-room hotel is “boutique” as Blue Road portrayed it. “This looks like a giant box,” Liebman said.

Blue Road’s attorney, Alfredo Gonzalez, insisted that a hotel needs at least 100 rooms to “make it in today’s market.”

“A boutique hotel has to have 100 rooms?” Liebman said while rolling her eyes. “Only in Miami Beach. Save it. I can’t support this today or tomorrow.”

After the Liebman-Finglass-Paskal side won, Reveulta asked for instructions. Finglass replied that the developer should strive to use more of what’s already present. “You’ve got a huge historic piece over here. Make use of it,” Finglass told Revuelta, later adding: “We’re trying to save the historic district, not block or restrict anything. Use what you’ve got to make the district matter.”

Revuelta told TRD that he tried to address the issues raised during the May 14 meeting. “I thought we had done everything possible to react to staff and board comment,” he said, “and there is no way we can make this only two stories. It kills the deal.”

“We need a bigger scale to address food and beverage, to address operations,” Tenenbaum further explained.

Nevertheless, Tenenbaum is determined to solve “the conflict of different ideas” and come up with a design that works. “We will be back in September and we will try to do some adjustments and, hopefully, they will approve.”

Airbnb competitor Sonder says after new funding round it’s now worth $1B

Sonder, a San Francisco-based startup that leases apartments and flips them into short-term rentals, closed on a $210 million funding round.

Sonder CEO Francis Davidson and 20 Broad Street

Sonder CEO Francis Davidson and 20 Broad Street

A hotel-room-style listing startup just obtained unicorn status.

Sonder, a San Francisco-based startup with a platform that leases apartments and transforms them into furnished short-term rentals, closed on a $210 million funding at a $1 billion valuation, the company said Thursday.

Sonder’s big funding round signals confidence in the hospitality startup that is competing with Airbnb, which largely draws income from fees it charges renters and hosts.

Unlike Airbnb, Sonder relies on an asset-heavy model that draws some comparisons to WeWork, which also leases space, outfits them and then rents them to end users.

Sonder entered the New York market last year after signing a lease at 20 Broad Street and has side-stepped the city’s strict short-term rental laws by occupying buildings that meet the zoning and building requirements of a hotel.

Airbnb, which is now valued around $38 billion, has been forced to tighten its policies in the city, where the laws restrict short-term rentals unless the owner of a home lives there.

Sonder says that it manages more than 8,500 units in 711 buildings. It currently has locations in 20 cities and said it recently signed leases in Philadelphia, Chicago, Seattle, Dubai and Dublin.

The company has raised a total $400 million, which includes an $85 million series C fundraise last August. The latest funding round was backed by Fidelity, Valor Equity Partners, Atreides Capital, ARod Corp and the Pritzker family through Tao Capital Partners. Its early stage investors, Spark Capital and Greenoaks Capital, also participated.

In addition to the $210 million fundraise, an additional $15 million in equity will be provided by developers who are partnering with the firm.

Compass reaches legal settlement with Zillow over poaching at its Seattle tech hub

Compass reaches legal settlement with Zillow over poaching at its Seattle tech hub

Zillow suit accused Compass of poaching three tech execs in Seattle

Compass CEO Robert Reffkin and Zillow CEO Rich Barton

Compass CEO Robert Reffkin and Zillow CEO Rich Barton

Zillow Group and Compass have buried the hatchet over allegations that the SoftBank-backed brokerage poached three technology executives from the listings giant.

The two companies — at odds since Zillow filed two separate lawsuits in April — said Wednesday that they settled those cases, which were filed in federal and Washington state court. “The two companies have agreed to resolve their differences,” a Compass spokesperson said, “and look forward to working together to help the entire real estate ecosystem.”

The news of the settlement came within an hour of Compass being hit with a searing lawsuit from Realogy — the parent company of the Corcoran Group, Coldwell Banker and others — accusing it of predatory recruiting and poaching, as well as price fixing and collusion. In a statement, Compass, which is valued at $4.4 billion, accused Realogy of turning to the courts to try to stifle competition.

In the Zillow cases, Compass was accused of hiring three technology executives from Zillow for its West Coast campus in violation of their non-competes. The listing giant also said Compass sought access to proprietary information that would accelerate its ability to build out a technology platform. On Wednesday, a spokesperson for Zillow said the settlement agreement with Compass allows both firms to operate “in a fair, competitive environment.”

Compass launched the Seattle tech campus in December, with the goal of building an “end-to-end” platform for real estate.

At the time, the company said it planned to hire around 100 engineers. It also hired former Microsoft and Amazon executive Joseph Sirosh as chief technology officer. But last month, three of Compass’ top executives in marketing and product resigned or were forced out of their roles, including Eytan Seidman, head of product; Khurrum Malik, chief marketing officer; and Max Henderson, vice president of product. In March, Compass’ general counsel, David Carp, and chief people officer, Madan Nagaldinne, left the firm. At the time, Carp was said to have continued working on a part-time basis.

Blackstone-backed mortgage lender Stearns files for bankruptcy

Blackstone-backed mortgage lender Stearns files for bankruptcy

Restructuring deal will wipe out $184 million in bond debt

July 09, 2019 11:30AM
Blackstone President and COO Jonathan Gray and Stearns Lending CEO David Schneider (Credit: Getty Images)

Blackstone President and COO Jonathan Gray and Stearns Lending CEO David Schneider (Credit: Getty Images)

Stearns Holdings, the parent company of residential mortgage lender Stearns Lending, filed for Chapter 11 protection Tuesday morning after agreeing on a debt-restructuring plan with majority owner Blackstone Group.

The restructuring will erase $184 million in outstanding bond debt from the California-based firm’s balance sheet, the Wall Street Journal reported. Stearns is also seeking court authorization to continue normal business operations during the bankruptcy process, including the payment of suppliers and vendors, and salaries and benefits for about 2,700 employees.

Blackstone acquired a majority stake Stearns Holdings in 2015. The financial firm is providing $60 million in new money for the restructuring, as well as a bankruptcy loan of up to $35 million to help the lender continue operations. Warehouse lenders have committed $1.5 billion to the plan.

Stearns’ $184 million in outstanding bonds are due to mature next August. The company paid down some of its bond debt last year by selling off most of its mortgage-servicing rights. In its Chapter 11 filing, it listed assets and liabilities each between $1 billion and $10 billion.

Mortgage rates tumbled in recent months after the Fed held off on raising interest rates further. A preceding period of rising rates had cut into Stearns’ lending business. [WSJ] — Kevin Sun

The We Company tries a new approach at raising billions: selling its debt

The We Company tries a new approach at raising billions: selling its debt

Company hopes the move will boost confidence in its business

July 08, 2019 09:03AM
The We Company CEO Adam Neumann (Credit: Getty Images and iStock)

The We Company CEO Adam Neumann (Credit: Getty Images and iStock)

The We Company needs to take care of something before its initial public offering: raising a few billion dollars by selling its considerable debt.

The company, which remains unprofitable, wants to raise up to $3 billion or $4 billion through a debt facility that could eventually increase to $10 billion, according to the Wall Street Journal. The We Company hopes that this will help boost confidence in its business, especially following the IPOs of Lyft and Uber, whose stock prices are below the value of their debuts. The We Company, which rebranded from WeWork earlier this year, lost $1.9 billion last year and has been frequently compared to the two ridesharing companies. It was valued at $47 billion earlier this year, though the Financial Times recently reported that some investors don’t believe the public markets will match that valuation.

JPMorgan Chase and Goldman Sachs are structuring the deal. It would allow the startup to use its cash flows from individual buildings to fund interest payments on the debt.

The transaction could be finalized over the next few weeks, and the We Company hopes to move forward with its IPO late this year or early next year. The We Company would not need to raise as much money from public stockholders if it raises billions in new debt, and the deal also aims to show off the value of WeWork’s leases and its ability to control profitability. [WSJ] – Eddie Small

Turkey’s gearing up to tax the wealthy and their luxury homes

Turkey’s gearing up to tax the wealthy and their luxury homes

Turkey may raise the top tax rate for high-income individuals and introduce a new tax on luxury homes — but not until October at the earliest

July 07, 2019 01:00PM
Luxury villas along the Bosphorus Strait in Turkey (Credit: iStock)

Luxury villas along the Bosphorus Strait in Turkey (Credit: iStock)

High-earners and those looking to purchase luxury homes in Turkey have gotten a brief respite before new taxes are slated to go into effect.

The country’s Treasury and Finance ministry prepared the tax measures and other proposals to contain the government’s growing budget deficit, which leapt 225 percent in the January-May period. But the proposed tax hikes in Turkey for high-income individuals and a new tax on luxury homes would not take effect until October, two sources familiar with the matter told Reuters.

Under the new measures, Turkey’s income tax rate would jump from 35 percent for those with annual income of one million lira (roughly $175,000) to 50 percent. It was not clear what the new tax would be on luxury property.

Reuters reported last week that the Treasury and Finance ministry drew up the measures, but they will not become effective immediately due to a recess expected to start July 15.

“Luxury housing and income tax items are postponed to October,” one source said. Another source told the outlet that taxes on luxury homes and high income have been excluded from the parliament’s pre-recess agenda.

In New York City, the residential market saw a flurry of transactions leading up to the implementation of new progressive taxes on residential real estate. [Reuters] – Mike Seemuth