Coronavirus delays sale of SF’s $1B Oceanwide Center

Coronavirus delays sale of SF’s $1B Oceanwide Center

A rendering of the Oceanwide Center

A rendering of the Oceanwide Center

It’s been over a month since Chinese developer Oceanwide Holdings announced a deal to sell its flagship San Francisco development for $1 billion, but it could take another month for the deal to officially close — and the new coronavirus outbreak is to blame.

Oceanwide and the buyer, an affiliate of Beijing-based asset manager SPF Group, have agreed to postpone the completion of due diligence and the delivery of Oceanwide Center by a month amid a coronavirus-related slowdown, the company announced Thursday.

“Due to the impact of the COVID-19 epidemic, due diligence work on this transaction has been somewhat delayed,” a filing with the Shenzhen Stock Exchange states. “Through amicable negotiation, both parties signed a First Amendment to the Sale Agreement on Feb. 26, 2020 to adjust the due diligence and delivery period.”

The due diligence deadline has been pushed back from Feb. 19 to Mar. 25, and the delivery deadline has been pushed back from Mar. 5 to Mar. 31, according to the disclosure. The buyer has deposited $20 million into a joint account as part of the deal.

Following Oceanwide’s Jan. 23 announcement of the deal, the company’s shareholders voted to approve the transaction at a meeting on Feb. 19, SZSE filings show. That meeting itself had been postponed by a week due to coronavirus concerns, and shareholders were encouraged to attend remotely rather than commute to Beijing.

The COVID-19 epidemic has delivered another blow for Oceanwide’s U.S. ambitions, as the firm’s major developments have already been hampered for years by capital controls and the U.S.-China trade war. The company is reportedly seeking to sell Oceanwide Plaza in Los Angeles and a development site in New York’s Seaport district as well.

And back in China, Oceanwide’s main ongoing development project is located in the Central Business District of Wuhan, which is at the epicenter of the outbreak.

Oceanwide has said it expects to take a $276 million loss on the sale of Oceanwide Center, which is set to include San Francisco’s second-tallest building after the nearby Salesforce Tower. The firm’s then-CEO, Han Xiaosheng, stepped down on the same day the sale was announced.

On Wednesday, the Centers for Disease Control and Prevention confirmed the first case of “community spread” of COVID-19 in the U.S., in Solano County northeast of San Francisco. On Thursday, Inman reported that a Bay Area condo buyer had a coronavirus contingency clause added to the contract because the seller is on lockdown in Wuhan.

With major clusters of coronavirus cases developing in Italy, Iran and South Korea, some U.S. real estate firms have also started to feel an impact. Hotels and malls, in particular, are facing the consequences of a decline in tourism.

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Colony Capital sells stake in RXR Realty

Colony Capital sells stake in RXR Realty

Colony Capital's Tom Barrack and RXR Realty's Scott Rechler (Credit: Getty Images)

Colony Capital’s Tom Barrack and RXR Realty’s Scott Rechler (Credit: Getty Images)

Colony Capital has offloaded its stake in New York real estate firm RXR Realty for an undisclosed sum.

The investment platform, led by Tom Barrack, sold the 27.2 percent stake to Dyal Capital Partners, Bloomberg reported. The value of the deal with Dyal, which reportedly has closed, is unknown, though a source told Bloomberg that Colony made a profit.

Colony last valued the stake at $100.3 million in March. It inherited the stake when it merged with NorthStar Realty Finance Corp. in 2017.

Under Barrack, who is expected to step down next year amid pressure from investors, Colony has pivoted its portfolio to digital real estate assets, including data centers. Last year, it sold its U.S. warehouse portfolio to European affiliate Northstar Realty Europe Corp.

RXR, led by CEO and chairman Scott Rechler, has overseen a flurry of deals in recent months, including leasing a warehouse in Maspeth, Queens, to Amazon. It is also developing the JetBlue terminal at John F. Kennedy airport. [Bloomberg] — David Jeans

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Fifth Wall closes $100M fund to bring online retailers into physical stores

Fifth Wall closes $100M fund to bring online retailers into physical stores

Fifth Wall Ventures' Brendan Wallace and Kevin Campos (Credit: iStock)

Fifth Wall Ventures’ Brendan Wallace and Kevin Campos (Credit: iStock)

A new generation of e-tailers are looking to make their first, risky step into the world of physical real estate, and one real estate-focused venture capital firm sees an opportunity.

Fifth Wall Ventures has closed a $100 million fund to invest in such companies, the Wall Street Journal reported. The fund’s investors include public retail landlords like Acadia Realty Trust and Macerich. The fund will connect those companies with potential tenants as part of its strategy.

“What these brands are realizing is that it is so hard to grow online,” Brendan Wallace, founder of the Los Angeles-based Fifth Wall, told the Journal. “Amazon is the company that destroys brand differentiation rather than augments it.”

Physical stores also benefit from far lower return rates than online purchases, which can help boost profit margins. The wealth of consumer data e-commerce retailers have collected can also help them select better locations for their brick-and-mortar locations.

But the operation of a physical store also comes with a new set of risks, from hiring staff and contractors to ensuring that there is enough electrical capacity. “Trying a retail opportunity in New York City could literally sink a business like ours,” Taft Clothing co-founder and CEO Kory Stevens said.

With assistance from Fifth Wall’s new fund, the Salt Lake City-based men’s shoemaker was able to quickly secure a three-year lease at a building in Manhattan’s SoHo district, owned by fund investor Acadia. [WSJ] — Kevin Sun

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REITs take a hit amid growing coronavirus concerns

REITs take a hit amid growing coronavirus concerns

REIT stocks fall amid global coronavirus concerns (Credit: Getty Images, iStock)

REIT stocks fall amid global coronavirus concerns (Credit: Getty Images, iStock)

Real estate investment trusts were not immune from Monday’s global market sell — particularly hotel properties — a result of the growing fears surrounding the coronavirus and its potential to trigger a global economic slowdown.

The S&P 500 fell 3.35 percent and the Dow Industrial Average plummeted over 1,000 points following news that the coronavirus, which has infected over 77,000 and killed over 2,500, was expanding in Italy and South Korea.

REITs took a hit but fared better than the broader market, largely because many REITs own properties based in the U.S.

REITs do provide a margin of safety,” said Omotayo Okusanya, managing director in the equity research department at Mizuho Securities.

The news rattled global markets Monday, and investors turned to defensive sectors like gold, which reached a seven-year high.

By market close, the SNL U.S. REIT Equity Index dropped just 1.32 percent, according to data from S&P Global Market Intelligence.

The hardest-hit sector Monday was hotels, as REITs with international properties were most affected, Okusanya said.

The SNL U.S. REIT Hotel index fell 4.71 percent, with Ryman Hospitality Properties, Wyndham Destinations and Hyatt Hotels Corp. all among the firms that suffered the biggest losses.

Industrial REITs also took a hit after hotels, with the SNL U.S. REIT Industrial index 2.86 percent lower Monday, according to S&P’s figures.

Self-storage was the only asset class that was not dinged; it crept up 0.23 percent, according to S&P’s figures.

The coronavirus outbreak could have a sustained impact on global supply chains, depending on the severity. China is where the outbreak began and where most of the deaths have occurred. The virus has already taken a toll on China’s manufacturing sector — and that could trickle down to affect the margins of logistics REITs. But such properties tend to have longer-term leases that should not be impacted by temporary disruptions, Okusanya said.

Prior to Monday’s market sell off, the virus’ impact on real estate had not yet been widely felt, and there had been scattered concerns in New York City’s residential world. But the impact of the coronavirus on financial markets also pushed mortgage rates to an eight-year low, according to CNBC.

Calvin Schnure, senior economist at REIT industry group Nareit, said the full impact of the coronavirus is not fully known. He said the stock plunge to start the week was akin to the recent market volatility stemming from the trade wars with China — REITs tended to fare better then as well.

“The market is reacting to a lot of fear and uncertainty,” he said. “The U.S. economy overall will have pockets that are hurt but the REITs have a lot of domestic focus.”

Write to Mary Diduch at md@therealdeal.com

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The best real estate markets on earth over the last decade

The best real estate markets on earth over the last decade

Clockwise from right: Hong Kong; Columbo, Sri Lanka; and Zagreb, Croatia (Credit: Wikipedia, iStock)

Clockwise from right: Hong Kong; Columbo, Sri Lanka; and Zagreb, Croatia (Credit: Wikipedia, iStock)

It’s been quite the decade economically in many parts of the world, and it shows in the values of homes.

Home values have more than doubled over the last 10 years in eight countries and territories across the world, according to a New York Times analysis. The analysis ranked places by the percentage increase in home values over the last 10 years, five years, and one year.

Nowhere have estimated home values increased by more than in Hong Kong. A house there is likely worth 193 percent more today than it was in 2010, according to the Times. In Brazil over that period, home values have shot up 152 percent.

The other countries where values increased by more than 100 percent are Peru, Chile, Estonia, Colombia, Malaysia, and Iceland. The U.S. didn’t make the top 15 list, but its neighbor to the north has experienced a 74 percent increase in home values.

Home price growth in the U.S. slowed last year as developers continued to deliver new inventory across the country.

Homes Sri Lanka have appreciated by 66 percent over the last five years. China, Turkey, Malta, and Iceland weren’t far behind —all saw average annual increases of more than 10 percent over that period.

Many countries that saw outsized long-term gains did not rank high in appreciation over the last year. Poland, Croatia, Germany, and Puerto Rico topped that category with 11 percent increases.

Value growth seems to be most consistent in Germany, Chile, and New Zealand — they were the only three countries that were top 15 for growth for each time period. [NYT] – Dennis Lynch

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Fredrik Eklund talks LA condos, the mega-luxury market and patience

Fredrik Eklund talks LA condos, the mega-luxury market and patience

Fredrik Eklund (Credit: Getty Images)

Fredrik Eklund (Credit: Getty Images)

“Million Dollar Listings” star broker and recent Los Angeles transplant Fredrik Eklund says condominiums are the new wave in his new West Coast home, where mansions in the hills have been the default in the luxury stratosphere.

The Douglas Elliman broker told Mansion Global that new projects in L.A.’s tony neighborhoods like Beverly Hills are presenting new options for buyers. Eklund is selling units at the recently built 8899 Beverly building.

8899 Beverly

8899 Beverly

“Vertical living didn’t used to be something people understood there,” Eklund said. “The whole idea of making a decision before a building was done, and having sales galleries before the home could be seen, that’s new.”

He also thinks L.A. can outdo New York for “mega-luxury homes,” pointing to the big-ticket sales that have closed in the L.A. area recently.

Earlier this month, Amazon founder Jeff Bezos broke a national record with the $165 million purchase of David Geffen’s Beverly Hills estate (he also bought a $90 million plot of dirt). Between July and December of 2019, three mansions in L.A. County sold for at least $100 million.

The ultra high-end market ($70 million-plus) is doing well, as are homes in the low $3 million range, he said. “But the more difficult market—not that it’s bad, just tricker—is the $6 million to -$15 million market,” he told Mansion Global.

Eklund also weighed in on the proliferation of high-end amenities being offered in condos and apartments. Wellness-style amenities are becoming more popular, like IV drips and cryotherapy sessions available to residents at 40 Bleecker in New York.

As far as advice to buyers, he suggested buyers and sellers be patient and “give it some time.”

“Brokers, myself included, can be pushy, but you need to take time,” he said. “We’re in a market where you have time to come back a few times and look at a place in different lights and at different times.” [Mansion Global] — Dennis Lynch

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Lead gen 2.0: RE/MAX app will go through agent contact lists to predict sellers

Lead gen 2.0: RE/MAX app will go through agent contact lists to predict sellers

RE/MAX CEO Adam Contos (Credit: Facebook, iStock)

RE/MAX CEO Adam Contos (Credit: Facebook, iStock)

RE/MAX Holdings is taking its latest lead generation play to the robots.

The company will launch a machine-learning app exclusive to its agents on Monday that uses machine-learning to comb through agents’ pre-existing contact lists and predict who is most likely to sell their home — and tells agents when they should reach out. RE/MAX announced the app on its fourth quarter earnings call Friday.

“Agents are losing patience on just ‘buying leads,’” said RE/MAX CEO Adam Contos during the call. “In many cases, they have the leads they need.”

RE/MAX CFO Karri Callahan

RE/MAX CFO Karri Callahan

Agents will have to pay a $49 monthly subscription fee to access the app, which will initially only be available in the U.S. On the call, RE/MAX CFO Karri Callahan said the company is subsidizing the cost of the app for agents by 50 percent.

“We think this is a really compelling opportunity… driving at the heart of lead generation,” said Callahan.

The app was built by North Carolina-based startup First, which RE/MAX acquired in late December.

The app, which was developed by First and bears its name, can search through agents’ contact list in three minutes and ascertain where they live and what property they own, its founder Mike Schneider told Inman in December.

In addition to alerting agents when they should reach out to specific contacts who are most likely to sell, the app also organizes agents’ contacts and provides reports on how much business they do within their network.

The First app is already on the market and being used by non-RE/MAX agents. Those pre-existing user contracts will expire in 2020 and going forward the app will be exclusive to subscribing agents at RE/MAX, Callahan said.

First was founded in 2016 and raised $16 million in venture capital funding. Though the financial terms of RE/MAX’s acquisition of First were not disclosed, Callahan said on the earnings call that the company paid using cash on hand and offered up equity.

The First acquisition comes amid RE/MAX’s broader push in technology investment. In 2018, it acquired booj, a web development and software firm that’s now become a platform of agents tools, including customized agent websites. Earlier this year, it announced a lead referral partnership with Redfin, which was canceled two months in.

RE/MAX noted during the call that First’s staff would be developing other tools and was part of a bigger push from the brokerage to build its “bench strength” of technologists, according to Callahan.

Overall, the company reported $68.2 million in revenue, a 34 percent increase year over year compared to 2018’s revenue of $50.8 million. The increase was attributed to RE/MAX mortgage business, Motto, and revenues from ad and marketing platform Marketing Funds, which it acquired in January 2019.

Expenses grew by 17 percent to $35.2 million year over year. Callahan explained the increase as in part due to higher equity-based compensation and increased legal costs. She noted that for 2020, RE/MAX expects a $4.5 million drag on earnings partly due to legal fees.

The company was named in two class-action lawsuits last spring alleging that the National Association of Realtors’ buyer broker compensation rules violate antitrust law.

The company’s total agent count grew 5.3 percent with the addition of more than 6,600 agents to a record figure of over 130,000.

Write to Erin Hudson at ekh@therealdeal.com

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Developer Carl Panattoni drops $29M on Palm Beach estate

Developer Carl Panattoni drops $29M on Palm Beach estate

Carl Panattoni, Raymond G. Perelman and 965 North Ocean Boulevard in Palm Beach (Credit: Panattoni, PennToday, and Google Maps)

Carl Panattoni, Raymond G. Perelman and 965 North Ocean Boulevard in Palm Beach (Credit: Panattoni, PennToday, and Google Maps)

Developer Carl Panattoni paid $28.57 million for an oceanfront Palm Beach estate, property records reveal.

The Perelman family trust, previously controlled by the late Raymond G. Perelman, sold the five-bedroom, 7,705-square-foot home at 965 North Ocean Boulevard. The price comes out to about $3,700 per square foot.

The deal is the most expensive residential sale to close so far this year in Palm Beach.

Perelman, who died in May, was founder, chairman and CEO of RGP Holdings, a private holding company composed of a vast array of manufacturing, mining, and financial interests. Along with his wife, Perelman was a well-known philanthropist in Philadelphia and Palm Beach.

Panattoni, the buyer, is chairman and founder of San Francisco-based Panattoni Development Company. The commercial real estate company focuses on office and industrial, and is one of the most active private industrial developers in the United States, according to its website.

In 2018, Panattoni and his wife Mary Jane paid $18 million for a home fronting the Everglades Golf Club in West Palm Beach.

His new Palm Beach home sits on a 1.24-acre property. Records show that Perelman paid $4.1 million for the property in 1992. The house was built in 1978.

The luxury residential market in Palm Beach has been on fire, with a number of records set in 2019.

Just this week, a company tied to Quicken Loans and its chairman Dan Gilbert paid $24.5 million for the Palm Beach mansion at 100 El Bravo Way.

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CrowdStreet hits $1B milestone, crowdfunding firm claims

CrowdStreet hits $1B milestone, crowdfunding firm claims

CrowdStreet CEO Tore Steen (Credit: iStock)

CrowdStreet CEO Tore Steen (Credit: iStock)

CrowdStreet said it has raised over $1 billion for commercial real estate deals through its online crowdfunding platform.

The milestone comes as the crowdfunding industry continues to mature, with some startups falling away and others facing troubles with underperforming assets.

Crowdstreet offers several tools to allow people to invest in commercial real estate, an industry that historically requires deep pockets to get into. CrowdStreet’s online marketplace launched in 2014, and the Oregon-based firms says it has over 80,000 investors and 193 operators and developers that have used it.

In 2019, the company raised over $500 million for 111 offerings, it said. One of the projects funded through the platform was Phoenix Development Partners’ 349-room dual-branded Hilton in downtown Chicago. For that deal, 200 investors poured in more than $10 million for the building’s redevelopment, according to CrowdStreet.

CrowdStreet last year also locked down $12 million in Series C financing, upping its total fundraising to $25 million.

A bevy of crowdfunding companies came on the scene around 2013, when a shift in U.S. securities law made it possible to expand crowdfunding for certain types of investments. For commercial real estate, the change was seen at the time as a way to make the investment class more accessible to a bigger pool of investors.

The wave of startups attracted venture capital financing that has since tapered. Some companies, like Fundrise, in the years since have shifted their models away from crowdfunding. Others, like the popular platform RealtyShares, stopped operating.

And another platform, Prodigy Network, which raised money for its own developments, faces investor lawsuits over mismanagement of funds.

Write to Mary Diduch at md@therealdeal.com

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Netflix’s “Dirty Money” series delves Jared Kushner, 1MDB scandal

Netflix’s “Dirty Money” series delves Jared Kushner, 1MDB scandal

Jared Kushner and Jho Low (Credit: Getty Images)

Jared Kushner and Jho Low (Credit: Getty Images)

Two years ago, the Netflix documentary series “Dirty Money” trained its sights on Donald Trump in an episode it called “The Confidence Man.” This time around, it’s staying in the real estate world and in the family.

The show will devote an episode of its second season to Jared Kushner, President Trump’s son-in-law and former CEO of Kushner Companies, according to the Hollywood Reporter. “Dirty Money” will also look into the 1MDB scandal. Federal authorities say Malaysian financier and current fugitive Jho Low, and his associates, used money from a Malaysian sovereign wealth fund to buy more than $1.7 billion worth of real estate, yachts, jets and jewelry.

“Dirty Money” will investigate Kushner in an episode titled, “Slumlord Millionaire.” The 1MDB episode is called “The Man at the Top.” Other episodes in the season will examine Wells Fargo, the life cycle of gold, and corruption and regulatory wrongdoing within one of the largest global plastics producers, according to the report.

The Kushner episode will focus on tenants of the real estate developer and landlord who are speaking out against the company.

Kushner Companies did not respond to an email seeking comment.

Kushner family patriarch Charlie Kushner has been at the helm of the firm since his son, Jared, the former CEO, left to work as a senior adviser in President Trump’s administration in 2017.

The firm has been pushing into suburban multifamily markets, and last year paid $1 billion for a portfolio of 6,000 rental apartments in Maryland and Virginia from private-equity firm Lone Star Funds.

Critics have accused the Kushners of having conflicts of interest regarding Jared’s government job and his family business, the firm has run into other troubles.

In 2018, the company was cited for falsifying construction paperwork and failing to identify that rent-regulated tenants lived at 17 Kushner properties undergoing extensive renovations in New York City.

The year before, Kushner Companies and its affiliates in Maryland were found to have sought the civil arrest of more than 100 former tenants since 2013, making the firm the most frequent user of that strategy for debt collection.

The company has also been hit with a class-action lawsuit alleging illegal deregulation and, in separate cases, compensated tenants for rent overcharge.

The series is produced by Alex Gibney’s Jigsaw Productions, says it will tell the “untold stories of scandal, financial malfeasance and corruption.” [The Hollywood Reporter] — Erin Hudson

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