Saks makes bid for Barneys, Eighty Seven Park will offer a certified botanist: 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.

Saks has teamed up with Authentic Brands to bid roughly $270 million for Barneys. Saks, which Hudson’s Bay Company owns, would launch Barneys departments in 41 of its stores, take over the website of the bankrupt retailer and possibly take over some Barneys locations. Barneys had filed for bankruptcy over the summer, and at a court hearing on Friday, a lawyer for the high-end fashion retailer said the company needed more time to solidify a possible deal that would keep it alive. [WSJ]

Eighty Seven Park will offer a certified botanist at the luxury condo project. The botanist can tend to plants on the property and water residents’ gardens. Terra is developing the 66-unit, 18-story condo building at 8701 Collins Avenue in Miami Beach along with its partners, Bizzi & Partners Development, New Valley and Pacific Eagle.

THesis Hotel is coming to Miami. The hotel component at Paseo de la Riviera, a mixed-use project on the former Holiday Inn site at 1350 South Dixie Highway in Coral Gables, will be known as THesis Hotel.

SMS Lodging lists Miami Beach hotel after selling another for $21M. SMS Lodging is looking to sell a boutique hotel in South Beach, following the $21.3 million sale of another hotel farther north in Miami Beach. [TRD]

WeWork’s first investor used his stock as collateral. Now his lenders are suing him. Joel Schreiber, a landlord whose firm Waterbridge Capital owns a vast portfolio of buildings in New York, used his stake in WeWork and properties he owned to back loans totalling almost $3.3 million, which he later defaulted on, according to two lawsuits filed Thursday. [TRD]

SoftBank’s problem solver faces his biggest challenge yet: WeWork. In late September, SoftBank Group’s Marcelo Claure took to Twitter to share his goals for the upcoming month. He wanted to beat his best running time, try a dish he had never had before, watch more soccer games, and figure out his daughter’s Halloween costume. A Twitter follower responded: Fix WeWork. [TRD]

Miami ranks at the top for cities with the highest rates of mortgage declines, according to a report. Almost 12 percent of all mortgage applications filed in Miami are denied, which is the most of any city in the U.S., according to a study by Lending Tree, the Miami Herald reported. The company analyzed more than 10 million mortgage application records from the federal Home Mortgage Disclosure Act. [Miami Herald]

Wawa and Aldi could be coming to a Lantana stalled project. The developer of the Water Tower Commons project will ask the Town Council to approve a gas station and convenience store on his property, according to the Palm Beach Post. The developer submitted plans to the town proposing a 5,900-square-foot Wawa and a 19,500-square-foot Aldi, according to the Post. [Palm Beach Post]

Softbank CEO Masayoshi Son (Credit: Getty Images)

Softbank CEO Masayoshi Son (Credit: Getty Images)

SoftBank Group is seeking to take over WeWork. SoftBank Group Corp. has set up a financing package to give it control of WeWork, which would help the struggling office startup’s cash problems. The board has also sought out JPMorgan Chase & Co. to look for ways the company can raise billions in debt. [WSJ]

Compiled by Keith Larsen

Homebuyers who bought after the market crash have made billions, Terra closes on $185M construction loan: 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 6:15 p.m.

Homebuyers who bought after the market crash have made billions. You read it right — a new report from Redfin shows that people who bought property in 2012, when housing prices hit rock bottom, have since earned more than $200 billion in home equity. [Mansion Global]

WeWork’s cash flow problems are deepening. The company is losing millions each day, and may only have enough cash to last until next Spring, according to a new report. [Bloomberg]

Millionaires fortunes are shrinking. Here’s what that means for real estate. The global population of individuals worth at least $30 million saw their net worth shrink in 2018 for the first time in three years — even as their ranks grew, according to a new report by research firm Wealth-X. [TRD]

Terra closes on $185M construction loan for latest Coconut Grove project. It’s one of the largest construction loans to close in South Florida this year, after the $300 million loan for Vlad Doronin and Cain International’s 830 Brickell office tower and the $225 million loan for The Residences at Mandarin Oriental in Boca Raton, both of which closed in July. [TRD]

Michael Gross, Zvika Shachar, and Roni Bahar (Credit: NOAH Conerence via YouTube,  LinkedIn, Presidio)

WeWork is booting Adam Neumann’s friends. At least two executives were told Wednesday night that their tenure with the company is up, people familiar with the matter told The Real Deal. While a source said some of the execs were still at WeWork as of Thursday afternoon, another source said the company was in the process of negotiating their exit packages. [TRD]

In a sluggish condo market, these Miami developers find a sweet spot. A new product type has emerged that developers claim they can’t build quickly enough: more affordable units that buyers can rent out however and whenever they want, no strings attached. [TRD]

American Eagle Outfitters CEO snags PH at Ritz-Carlton Miami Beach. The CEO of American Eagle Outfitters bought a penthouse at the Ritz-Carlton Residences, Miami Beach for $6.5 million, in one of the first closings at the luxury condo development. [TRD]

From left: Edward Romo, Ryan T. Shaw and Scott C. Sandelin and the property

From left: Edward Romo, Ryan T. Shaw and Scott C. Sandelin and the property

Assemblage in downtown Fort Lauderdale selling for $12M. An investor is assembling land south of Las Olas Boulevard in downtown Fort Lauderdale for $12 million, with long-term plans to develop the 1.1-acre site. [TRD]

Related Group, Alex Karakhanian and partners drop $32M on Wynwood site. The Related Group, developer Alex Karakhanian and their partners purchased a large property in Wynwood for $32 million, with plans to redevelop the site, The Real Deal has learned. [TRD]

Adam Neumann (Credit: Getty Images, iStock)

WeWork insiders slam Neumann and his enablers: “They created the monster” In interviews with The Real Deal, eight current and former WeWork executives described a circle of top staff around Neumann who enabled his actions and feared running afoul of the charismatic CEO. [TRD]

The Venezuelan government could soon be seeking to confiscate the homes of millions of Venezuelans living abroad. Venezuelan leader Nicolás Maduro ordered a census on how many homes are empty, adding to fears that the homes may be confiscated by the government, according to the Miami Herald. [Miami Herald]

Keys Hospital wiped out by Irma expected to open in 2021. Fishermen’s Community Hospital in Marathon is about to be rebuilt after being destroyed by Hurricane Irma, according to the Miami Herald. The $43 million building is planned to open in summer of 2021. [Miami Herald]

Compiled by Keith Larsen

Here are the homes of Miami Heat’s elite, developer Steve Witkoff revealed as buyer of Sunset Islands home: 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 p.m.

From left: Dion Waiters, James Johnson, Erik Spoelstra, LeBron James, Chris Bosh and Hassan Whiteside (Credit: Getty Images, iStock, Wikipedia Commons)

From left: Dion Waiters, James Johnson, Erik Spoelstra, LeBron James, Chris Bosh and Hassan Whiteside (Credit: Getty Images, iStock, Wikipedia Commons)

Here are the homes of Miami Heat’s elite. After retiring from professional basketball, Miami Heat legend Dwyane Wade put his waterfront Miami Beach home on the market for $33 million last week. Wade isn’t the only basketball player with an impressive pad in South Florida. Wade’s current and former teammates have also made a splash in real estate, buying luxury homes in Pinecrest, Coconut Grove and Miami Beach. [TRD]

Developer Steve Witkoff revealed as buyer of Sunset Islands home. New York developer Steve Witkoff is the buyer of a waterfront Miami Beach home that sold this summer for $10 million, property records show. [TRD]

Hank Freid and Marriott Fort Lauderdale Pompano Beach

Hank Freid and Marriott Fort Lauderdale Pompano Beach

Hank Freid buys Marriott-branded Pompano Beach hotel for $44M. A company tied to New York hotel developer Hank Freid paid $44 million for a Marriott-branded Pompano Beach hotel amid heightened demand for waterfront properties in the city. [TRD]

Peter D’Aloia and 1435 West 27th Street

Peter D’Aloia and 1435 West 27th Street

Former Honeywell exec trades Sunset Islands home for Fisher Island condo. A former Honeywell executive sold a home in Sunset Islands for $14.6 million, a 36 percent drop from its initial listing price. [TRD]

Luxury properties at play in Rudy Giuliani’s ugly divorce. The couple’s properties include a sprawling home in the Hamptons and a two-bedroom condo in Palm Beach now on the market for $3 million. [TRD]

WeWork has made some unique design choices on its IPO prospectus. Normally, companies rank banks linearly on the cover of their offering documents, putting the lead bank with the most input in the top left. [WSJ]

Adam Neumann has started discussions about his future role at WeWork. He could possibly transition into the role of chairman or stay on as CEO with an independent chairman joining the board. [Reuters]

Fannie Mae and Freddie Mac could start keeping their profits again this week. The expected agreement between the pair of mortgage finance companies and the Trump administration would be a major step toward letting the firms build up capital and operate as private companies again, according to the Wall Street Journal. [WSJ]

WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

Can WeWork survive without Adam Neumann? Adam Neumann’s vision and hype built WeWork into the largest provider of office space in the world. But his eccentric and self-serving behavior, failed IPO plans and hemorrhaging losses at the company have prompted SoftBank — its largest investor — to push for his ouster as CEO. [TRD]

British travel agency Thomas Cook collapses, leaving thousands stranded. British tour company Thomas Cook collapsed on Monday, leaving thousands of travelers stranded, according to the Associated Press. The company’s real estate costs, including its 600 travel agencies and its 200 hotels increased its debt burden. [AP]

Lennar Corp. plans to move into the former headquarters of Burger King. Lennar Corp, one of the largest homebuilders in the country, is leasing 156,000 square feet in an office building in Miami’s Blue Lagoon that once housed Burger King’s headquarters, according to the South Florida Business Journal. [SFBJ]

Compiled by Keith Larsen

Adam Neumann is facing a coup. Can We work without him?

WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

Adam Neumann’s vision and hype built WeWork into the largest provider of office space in the world. But his eccentric and self-serving behavior, failed IPO plans and hemorrhaging losses at the company have prompted SoftBank — its largest investor — to push for his ouster as CEO.

“Could the company survive without Adam?” said Sam Zell, the chairman of Equity Group Investments. “I’m sure they could.”

A profile last week in the Wall Street Journal revealed that Neumann smoked marijuana on a private flight overseas, prompting the jet’s owner to recall the plane.

That appears to be the tipping point for SoftBank’s founder Masayoshi Son, who is pushing to remove Neumann from the top job, according to a report Sunday from CNBC. Neumann would move into a non-executive chairman role, according to the Wall Street Journal. Representatives for the We Company declined to comment.

“What can get these guys in trouble is their egos and arrogance,” said Ray Mikulich, the chairman of commercial real estate software giant Altus Group and Colony Capital board member. “The skills and attributes that make a founder successful are not necessarily well suited for a public environment.”

The removal of a company’s founder before an IPO has precedent. At Uber, co-founder and CEO Travis Kalanick left the company after a laundry list of scandals and missteps. He was replaced by Dara Khosrowshahi, who ultimately led the company to its public offering in May.

Other founders, however, have managed to hold on to their notable startups even in the face of controversy.

Elon Musk, who remains at the helm of Tesla, has been cited in recent years for erratic behavior, including smoking marijuana on a live radio show and prompting a U.S. Securities and Exchange Commission investigation with a single tweet. Mark Zuckerberg faced pressure to leave to leave Facebook after a series of privacy-related scandals but has remained at the helm.

Neumann’s own dubious behaviors — recent disclosures include a desire to become president of the world, prime minister of Israel, the first trillionaire and to live forever — appear to be the final straw for some directors of WeWork’s parent company.

But others direct blame for WeWork’s misgivings at the board, which includes representatives from investors SoftBank and Hony Capital. Scott Galloway, a marketing professor at New York University and outspoken skeptic of WeWork’s valuation, said that the board appears to exist to enable Neumann’s control of the company.

“Adam’s not the problem, but a weak board that has let him engage in self-dealing and set no boundaries,” Galloway wrote in an email. “Good boards are fiduciaries for all stakeholders.”

Some see a benefit to Neumann leading the company in the public markets — in part because the process of finding an equally skilled fundraiser would pose a challenging task, said Rett Wallace, CEO of Triton Research Inc.

“It’s not super clear you can get others to do that,” said Wallace, who previously worked as an investment banker with Allen & Company and Morgan Stanley. “If you take the cult leader out of it, everything collapses.”

However, if the IPO does not go ahead, the company’s future relies on Neumann’s ability to attract further investment from SoftBank — an unlikely scenario given Sunday’s reports.

The fallout began last month, when Neumann and other We Company executives were caught off guard by negative feedback to its IPO prospectus.  Among the disclosures were inexplicably large loans and payments to Neumann, failed ventures and no path to profitability in the foreseeable future.

The company said last week it would delay its IPO but promised to complete it before the end of the year. It’s also taken steps to right the ship.

The firm said it would unwind a $5.9 million payment to Neumann for the use of the “We” trademark. In the event he dies or is incapacitated, his wife Rebekah Neumann is no longer assigned to pick his successor.

Some say the concessions don’t go far enough: Neumann still holds a majority voting control of the We Company’s board. Who decides on his future with the company should be made by shareholders, Zell said.

“There’s a bunch of people who are $12 billion invested in this thing,” he said. “They’re the ones who should make the call.”

Small Talk: Trying to make sense of the WeWorld

WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

WeWork CEO Adam Neumann (Credit: Getty Images and iStock)

The best part about the stock market is how much of a sure thing every investment is, and the best part about startups is that they are all guaranteed to become incredibly prosperous businesses. So when the guaranteed success of a startup meets the guaranteed success of the stock market, any investments are guaranteed to make you so much money that the word “guaranteed” will quickly start to sound weird based on how often you’re using it.

And that brings us to WeWork.

The massive company, which has the complementary goals of subleasing office space and revolutionizing human society, is expected to hold its initial public offering this fall, and everyone from recent business school graduates to established titans of finance has reacted with a resounding cry of, “Wait, what exactly do these guys do again?”

The basic answer is “everything.” As far as I can tell, in an ideal WeWork world (quick side note: how has the company not launched a division called WeWorld yet?), a person would wake up in their WeLive apartment, drop their kid off at a WeGrow school, go to their job in a WeWork building, pick up dinner on the way home at WeTraderJoe’s, and then go to sleep in a giant, collaborative WeBed. And, of course, they would take occasional breaks to WeWee.

But as the company prepares to go public, it has also started to release more information about how it actually works. This has led to several concerns about WeWork’s ability to accomplish many of its lofty goals, such as changing the concept of what an office looks like and existing beyond December.

The company’s landlords are feeling particularly anxious about the WeWork IPO. One even told The Real Deal that there were certain things in the company’s initial disclosure report that he would “rather not have seen,” although he did add, “Obviously, I’m sure a lot of it can be explained.” Coincidentally, “I’m sure a lot of it can be explained” is almost the exact same reaction my mom had when I was 19 and she came home to find a giant vomit stain on our basement couch. So hopefully WeWork’s explanation will be better than mine was.

Another group dealing with some WeWork IPO anxiety is SoftBank, which you may remember as the company that previously felt good enough about WeWork to invest more than $10 billion in it. The conglomerate has now somewhat reversed course and is urging WeWork to shelve its IPO plans, which feels a bit like your parents subsidizing your music career for 10 years before politely asking you to think about law school.

WeWork has made some changes in response to these concerns. It will postpone its IPO until at least mid-October, and it is putting more restrictions on what CEO, Future President of Earth and Messiah Adam Neumann can do. He will not be allowed to make real estate deals going forward, for instance, and he will give back the $5.9 million the company paid him for trademarking use of the word “we,” which is probably good news not just for WeWork but for the English language in general.

But despite these concerns, the company is still planning to go public. So given that WeWork seems set on making its stock market debut no matter what, all of these issues are ultimately leading up to one major question. And that question, of course, is: if I try to copyright the term “WeWorld” now, will I eventually be able to sell it back to WeWork for an exorbitant fee? And also, should I plan to buy stock in WeWork?

The answer to the first question is a resounding yes. It’s a little tougher for me to answer the second question, given that my entire experience with the stock market so far consists of pretending to buy some shares in Dell during the “Stock Market Game” in sixth grade before getting bored and going back to playing MarioKart. So, for now, I’m just going to say “maybe,” and hopefully that will leave everyone satisfied.

And if it doesn’t, just check back in with me about buying WeWork stock in, say, five or 10 years. I’ll probably be able to have a more definitive answer for you then.

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

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

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.”

Behind the curtain of WeWork’s all-male board of directors

Behind the curtain of WeWork’s all-male board of directors

WeWork has named six people to its board in advance of its IPO

From left: Lewis Frankfort of Flywheel Sports, Bruce Dunlevie of Benchmark, Ronald Fisher of Softbank, Mark Schwartz of Softbank, and John Zhao of Hony Capital (Credit: Stanford University; Softbank; Getty Images)

From left: Lewis Frankfort of Flywheel Sports, Bruce Dunlevie of Benchmark, Ronald Fisher of Softbank, Mark Schwartz of Softbank, and John Zhao of Hony Capital (Credit: Stanford University; Softbank; Getty Images)

WeWork recently revealed the makeup of its Board of Directors in advance of its much anticipated IPO, and the selections are already stirring up some controversy.

Many have zeroed in on the fact that none of the board members are women, despite the fact that the co-working giant’s S-1 filing promoted a “culture of inclusivity.” And because WeWork co-founder Adam Neumann remains chairman of the board and its majority shareholder, he retains the ability to outvote all six other board members on virtually any decision, even if they are aligned against him.

Unlike other startups such as Slack and Salesforce, Neumann has not cemented an employment agreement with WeWork ahead of its IPO, and his wife Rebekah Neumann will be responsible for appointing his successor if he dies or becomes permanently disabled within the next 10 years. Venture capitalist Bruce Dunlevie and asset manager M. Steven Langman will also serve on the selection committee.

WeWork declined to comment for this story, and representatives for the board members did not respond to requests for comment.

Here are some of the other key things to know about WeWork’s new board members:

Bruce Dunlevie
The 62-year-old Dunlevie is a founding partner at the San Francisco-based venture capital firm Benchmark, which famously invested in eBay in 1997 and has backed startups such as Uber, Twitter and ZIllow. A 20-plus year veteran in the world of tech investing, Dunlevie was a general partner at the VC firm Merrill, Pickard, Anderson & Eyre and founded Everex Systems’ personal computer division before starting Benchmark. He earned an MBA from Stanford University’s Graduate School of Business and also serves as the director of One Medical Group. He has been a member of WeWork’s board of directors since 2012.

Ronald Fisher
Fisher, 71, is a vice chairman at WeWork mega-backer Softbank Group, where he’s worked since 1995. He founded SoftBank Capital and was the CEO of Phoenix Technologies before joining the bank. Fisher joined the board of directors at WeWork as part of SoftBank’s 2017 investment of $4.4 billion in the company. The Japanese bank had planned to invest an additional $16 billion in WeWork late last year, but that number later shrank to $2 billion amid concern from investors. Fisher earned an MBA from Columbia University and has been on WeWork’s board of directors since 2017.

Lewis Frankfort
Frankfort, 73, is the chairman of Flywheel Sports and the former executive chairman at luxury accessories brand Coach. He also serves as the executive-in-residence at Sycamore Partners LLC. He started his career in city government, at one point serving as the commissioner of New York City’s Head Start and Day Care programs. He gave the keynote speech at WeWork Summer Camp in 2014, where he told the employees that they could get lucky in business, but there was still “no substitute for working hard.” He has been on the board since 2014, and he has received $6.3 million in loans from the company.

Steven Langman
Langman, 57, co-founded the London-based private equity company Rhône Group in 1996, which last year formed a joint-venture with WeWork named ARK that has pulled together $2.9 billion to invest in buying real estate. Langman is also the chairman of ARK. He previously worked at Goldman Sachs in the mergers and acquisitions department and at Lazard Frères as a managing director, where he also specialized in mergers and acquisitions. He has been on WeWork’s board of directors since 2012.

Mark Schwartz
Schwartz, 65, was until recently a member of the board of directors at SoftBank, a company he formed a close relationship with as a longtime executive at Goldman Sachs. Schwartz had been head of the investment bank’s Asia-Pacific region before retiring in 2016, where he served as the bank’s point person for Alibaba’s record $25 billion IPO. In 2006, he founded the private investment firm MissionPoint Capital Partners, which focuses on using capital to help solve environmental problems. He also serves on the board of the Indian mobile commerce company Paytm. Like Fisher, Schwartz joined the board as part of SoftBank’s $4.4 billion investment in WeWork.

John Zhao
Zhao, 56, is the chairman and CEO of Hony Capital, a major Chinese private equity company. In 2018, the firm helped lead a $500 million Series B investment in WeWork China, and Zhao released a statement praising the company as “a global connector bringing entrepreneurs, startups, and large enterprise companies from around the world together.” He is also a director at several other companies including Lenovo and China Glass Holdings.