The Real Deal New York

National Cheat Sheet: Fed warns of rising commercial real estate prices, Airbnb adds Amazon exec ahead of IPO … & more

By Maya Rajamani | November 30, 2018 08:30AM

Clockwise from top left: Federal Reserve issues warning about the effects of rising commercial real estate prices, firm plans $1B worth of co-living inventory as arrangement’s popularity grows, entrepreneur who claims he was a Compass co-founder seeks $200M in suit and Airbnb taps a former Amazon executive to be its new CFO.

Fed, highlighting asset bubble dangers, red flags rising commercial real estate prices
A report released Wednesday by the Federal Reserve warns that soaring commercial real estate prices across the country could harm financial markets, according to the Wall Street Journal. The warning came from the Fed’s first-ever financial stability report, which cited “elevated asset prices, historically high debt owed by U.S. businesses and rising issuances of risky debt” as factors posing the biggest problems for the country’s financial system. The report also pointed to asset bubbles, and not inflation, as the impetus for the past two recessions. Fed Chairman Jerome Powell spoke about the subject Wednesday at The Economic Club of New York. [TRD]

Firms plan $1B worth of co-living inventory as arrangement’s popularity grows
Property Markets Group is going all in on co-living. The New York-based firm is planning to roll out $1 billion worth of co-living inventory and is partnering with Raven Capital Management to commit $300 million in equity to a “multifamily housing division” known as X Social Communities. PMG, which was one of the first developers to board the co-living train, currently offers co-living units in Chicago and Miami. The company is planning to put co-living apartments on the market in Fort Lauderdale and Miami, among other locales. “Our product provides incredible value to our customers,” PMG principal Noah Gottlieb said. [TRD]

Entrepreneur suing Compass revealed to be seeking $200M
A tech entrepreneur who claims Compass used his ideas to found the company without crediting or compensating him is seeking a stake in the business now worth roughly $200 million. Avi Dorfman sued the SoftBank-backed brokerage and its CEO Robert Reffkin four years ago, but his specific monetary claim was not initially disclosed and subsequently redacted in court filings. During a recent court hearing in New York, it was revealed that Dorfman believes he was entitled to a 15 percent stake in Compass at the time of its founding. After multiple funding rounds by the company, which was recently valued at $4.4 billion, Dorfman’s potential stake would be diluted to about 4 percent. “We believe Mr. Dorfman has a very strong claim as one of the founders of Compass,” his attorney, Susman Godfrey partner Arun Subramanian, told TRD. Compass claims Dorfman turned down a job he was offered at the company to work at a hedge fund instead. [TRD]

Airbnb taps Amazon exec to be its new CFO
A former Amazon executive will take the lead on Airbnb’s finances starting in January, Bloomberg reported. The home-sharing startup has hired Dave Stephenson, who was vice president and chief financial officer of Amazon’s worldwide consumer organization, to be its new CFO as it ramps up for an initial public offering. Stephenson oversaw global website sales at Amazon, and is filling a position that has been vacant since Laurence Tosi left Airbnb in February over reported differences with the company’s CEO. Airbnb, which has a private valuation of $31 billion, is reportedly preparing to launch an IPO by 2020. [TRD]

MAJOR MARKET HIGHLIGHTS

HUD’s New York head to move into a NYCHA building amid utility outages
Lynne Patton, who oversees the Department of Housing and Urban Development for the New York region, said she plans to move into a New York City Housing Authority building to protest and shed light on the lack of heat and hot water at NYCHA buildings throughout the city, PIX11 first reported. In a tweet, Patton, who was appointed by President Donald Trump in 2017, wrote that “[basic human conditions are non-negotiable.” In February, the Trump administration proposed a multibillion-dollar budget cut that would slash financial support for a fund that benefits NYCHA and other public housing authorities. [TRD]

Chicago area home prices rise, but lag behind national average
Home prices in Chicago are on the rise, but they still aren’t as high as they are nationwide on average, Crain’s reported. Prices rose 3 percent in September after rising for six straight months, but the national average was 5.5 percent, according to data from S&P CoreLogic Case-Shiller. “Home prices plus data on house sales and construction confirm the slowdown in housing,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in a statement provided to Crain’s. Nevertheless, the Windy City still ranks as the second-most affordable large city in the country to buy a home. [TRD]

Southwest Florida mansion sets sales record, only to be demolished and replaced
A mansion in Naples that set the record for the priciest home sale in Southwest Florida no longer exists. The 24-year-old mansion on Gordon Drive was demolished by its buyer, 2500 Gordon Land Trust, which plans to build a new home at the site. The six-bedroom mansion was built in 1994 and was originally listed for $60.9 million, but ended up selling for $48.8 million in June. Architect John Cooney will design the new home at the site and Newbury North Associates will build it, according to the Naples Daily News. [TRD]

Deadly Woolsey Fire leaves LA and Ventura counties with $5B in damage
Los Angeles and Ventura counties are still recovering from California’s catastrophic Woolsey Fire and face up to $5 billion in real estate damages as a result of the blaze, according to an estimate by property data firm CoreLogic. That figure could include anywhere from $3.5 billion to $4.5 billion in residential property damage, as well as up to $500 million in commercial property damage, the OC Register reported. The Woolsey Fire, one of several blazes to tear across the Golden State in November, killed three people and left three firefighters injured before it was contained on Nov. 21. It also destroyed more than 1,600 structures and burned nearly 97,000 acres of land. [TRD]

Seattle’s housing market sags as Amazon looks to the East Coast
With all eyes on Amazon’s East Coast plans, growth in the e-commerce giant’s hometown of Seattle has been waning, the Wall Street Journal reported. Bidding wars on properties in the city declined as Amazon spent the past six months searching for a locale for its so-called HQ2, and median growth is the slowest it has been in Seattle since January 2013, according to the outlet. Landlords, meanwhile, have been offering perks like Amazon gift cards and free rent in an attempt to entice tenants and buyers. “If you’ve got that much going on and you’re really trying to get New york and Virginia up and running, you have a tendency to ignore Seattle,” RealPage chief economist Greg Willett told the newspaper. [TRD]

Google drops $1B for office complex near Mountain View headquarters
Alphabet, Google’s parent company, has snapped up a business park in California for $1 billion, Bloomberg reported. Alphabet recently bought Shoreline Technology Park, which is not far from its “Googleplex” Mountain View headquarters. Google also recently bought office space in Sunnyvale and is hoping to build a new development in San Jose, though its plans have been stymied by legal issues. Earlier this year, Google bought the Chelsea Market building in Manhattan for $2.4 billion. The internet search giant’s latest purchase comes not long after Amazon’s HQ2 announcement, as well as the latter’s announced plans to open a regional hub in Nashville. [TRD]