The Real Deal New York

National Cheat Sheet: Investors ditch hedge funds for real estate, Quicken Loans slapped with $11M fine … & more

By Grace Guarnieri and Jeff Vasishta | July 21, 2017 06:00PM

Clockwise from top left: Miami Beach, Compass founder and CEO Robert Reffkin, Venice Beach, Quicken Loans building.

Investors are putting their money in real estate over hedge funds

Wealthy investors currently have about 33 percent of their portfolios in real estate, according to a survey by Tiger 21, a social networking site for investors. The survey also revealed that hedge fund investments slid to 4 percent, Bloomberg reported. [TRD]

Quicken Loans slapped with $11M fine for appraisal tampering

Quicken Loans, the holder of the No.1 customer satisfaction rating by J.D. Power for seven years, has received a blow to their image in the form an $11 million fine for influencing appraisals to encourage loan approvals. The tampering dates back to the boom years prior to 2008, when the mortgage company furnished appraisers in West Virginia with “estimated” home values, needed to secure a loan approvals, which ultimately left the owners under water, a federal prosecutor said. [TRD]

More Canadians are moving to the U.S.: report

While China is still the leading foreign buyer of United States homes, with a whopping $31.7 billion spent in the year that ended in March, our neighbor to the north also made some considerable investments. Canadians increased their spending in the U.S. housing market, jumping from $9 billion in 2015 to $19 billion invested last year, The Wall Street Journal reported. Rising prices in cities like Toronto and Vancouver are credited for the increase in Canadian investments in the U.S. According to a report by the National Association of Realtors, foreign buyers make up about 10 percent of American home sales. [TRD]

Blackstone executive predicts tougher times than expected for retailers

Times are tough even in the luxury retail market, Blackstone Group managing director Nadeem Meghji said this week. “The retail industry is clearly facing headwinds,” Meghji told the Financial Times, adding that he hadn’t thought luxury retailers would be affected so quickly. And the numbers back that up: Cushman & Wakefield’s most recent market report showed availability rates of 20 percent or more in six of Manhattan’s 12 top retail markets. [TRD]

Lack of lumber causes homebuilder confidence to dip to an eight-month low

Rising material costs, particularly lumber, has the homebuilding industry concerned. Builder confidence has hit an eight-month low, according to a poll by the National Association of Home Builders and Wells Fargo. Housing demand is still strong, but builders feel pressure to absorb the increase in costs in order to offer competitively priced homes, the poll found. NAHB Chairman Granger MacDonald told Bloomberg that rising prices of building materials “is hurting housing affordability even as consumer interest in the new-home market remains strong.” [TRD]

Sears-affiliated REIT sells almost $250M share of company to mall owner GGP

Real estate investment trust Seritage Growth Properties just completed two sizable transactions, offloading its 50 percent stake to its joint venture partner, General Growth Properties. Seritage was initially formed by Sears CEO Eddie Lampert two years ago to raise money for the ailing retail chain. As part of the new deals, 50 percent of the eight of the 12 Sears assets it owned were sold for $190 million along with half of a JV interest for five other properties, also sold to GGP, for $57.7 million. [bisnow.com]

Compass CEO predicts international expansion in next 18 months

Residential brokerage Compass’s CEO Robert Reffkin has his sights set on heading abroad. In an interview with The Real Deal in His Fifth Avenue office, Reffkin predicted that Compass would have an international presence within 18 months. He declined to specify which markets he would like to target first. In just four years, Compass has raised over $225 million in venture capital and has reached a valuation of over $1 billion. [TRD]

 Major Market Highlights

South Florida’s residential market shows signs of improvement: Elliman 

Douglas Elliman’s 2017 Q2 report revealed that sales were up for the second quarter in a row. Miami Beach saw a 3.7 increase in sales, year-over-year and sales in Fort Lauderdale were up 10.2 percent year-over-year. Jonathan Miller, the author of the report, credits the uptick to sellers pricing their homes more reasonably. “Sellers of high-end real estate are more in sync with reality than they have been in the past,” he told The Real Deal. [TRD]

New York City self storage surge

Due to a lack of self storage space relative to the New York City population, self storage companies including Cube Smart and Extra Space Storage have seen a surge in demand. As a result of the demand, between 2 and 2.5 million square feet of self-storage space is under development across the five boroughs. However, not all storage companies are putting their eggs in the NYC basket. REIT Self Storage CEO told TRD that the company isn’t planning any New York facilities given the upcoming increase in storage spaces in the city. [TRD]

Venice Beach is the toughest place to build in America

Strict zoning codes coupled with the culture of the “Not In My Back Yard” sentiment has made Los Angeles’ Venice Beach the hardest area to develop in the United States, according to data from BuildingZoom, a site that connects homeowners to local contractors. Venice hasn’t gained a single housing unit in the past 15 years, according to The Wall Street Journal. Due to downzoning and wealthy buyers who bought and destroyed adjacent properties to expand, Venice housing units shrunk by 700 between 2000 and 2015. [TRD]

Louisiana Governor yields to FTC pressure over appraisers’ pay 

In a decision that is likely to please appraisers everywhere, Louisiana Gov. John Bel Edwards issued an executive order that repealed a state law that limited how much appraisers could be paid by their management companies. The repeal followed a complaint filed by the Federal Trade Commission accusing the state of price fixing. [Housing Wire]

Chinese investors would rather move to Los Angeles over New York

Wealthy Chinese citizens would rather call themselves Angelenos, not New Yorkers. According to a survey from Hurun Report, those with a net worth of over $1.5 million that are looking to move to the United States are favoring Los Angeles. CNBC first reported that worries over the stability of Chinese currency, air pollution, and education are the primary driving factors for those looking to emigrate from China. [TRD]