The Real Deal New York

National Cheat Sheet: Real estate’s top billionaires revealed, retail apocalypse continues… & more

By Maya Rajamani | March 08, 2019 02:00PM

Clockwise from top left: Dollar Tree to shutter or rebrand hundreds of Family Dollar stores, the richest real estate billionaires on an annual Forbes ranking hail from China and Hong Kong, dozens of Gap and Victoria’s Secret stores prepare to close amid low sales and real estate investment trusts are benefiting from the Federal Reserve’s decision to keep interest rates where they are.

China, Hong Kong real estate billionaires top Forbes’ richest list
Forbes has released its annual ranking of the world’s wealthiest people, and the real estate moguls who placed highest on its list are all from either China or Hong Kong. Evergrande Group’s Hui Ka Yan took the 22nd spot with a net worth exceeding $36 billion, while Dalian Wanda chairman Wang Jianlin placed 36th with a net worth of $22.6 billion, according to Forbes. Irvine Company chairman Donald Bren was the highest-ranked American property mogul, placing 68th on the list. Related Companies’ Stephen Ross took the 191st spot on the ranking with a net worth of $7.6 billion. Ross, the developer behind New York’s Hudson Yards, was the only major Manhattan real estate billionaire in the top 200. [TRD]

Hundreds of Gap, Family Dollar, Victoria’s Secret stores to close
Around 230 Gap stores and 53 Victoria’s Secret stores will be closing, their respective parent companies have said. Dollar Tree, which owns the Family Dollar chain, also plans to close up to 390 stores and convert another 200 Family Dollar stores into Dollar Tree shops, the Wall Street Journal reported. (Dollar Tree bought Family Dollar for around $9 billion in 2015.) As for Gap, it plans to split off its Old Navy brand into a separate company, as the chain’s “business model and customers have increasingly diverged from our specialty brands over time,” said a statement from board chairman Robert Fisher. Old Navy has been doing better than its sister companies, Gap and Banana Republic, according to USA Today. Meanwhile, Victoria’s Secret, a flagship of retail giant L Brands, has experienced a drop in sales amid an increased desire among shoppers for so-called “comfort lingerie,” according to CNBC. [TRD]

Amazon pulls plug on pop-up stores, plans new grocery chain
Fresh off ditching Long Island City for its so-called H2Q, Amazon is now preparing to shutter 87 pop-up retail stores throughout the country by the end of April, according to the Wall Street Journal. The e-commerce giant, which launched the small store concept in 2014, is reportedly reevaluating its physical retail plans. The purported move comes as Amazon prepares to launch a new grocery store line, one whose first outpost will open in Los Angeles, the Wall Street Journal reported. The Los Angeles store could open before the end of the year, and two other stores are expected to open at the beginning of 2020, according to the outlet. Amazon’s new chain isn’t being billed as a competitor to Whole Foods, which the company acquired in 2017 and reportedly has plans to expand, but will instead offer a broader range of products. The new stores will be about 35,000 square feet, although its plans aren’t set in stone, as Amazon could back out of its existing contracts, the outlet reported. [TRD]

We Company sheds 300 staffers, or 3 percent of its workforce
The co-working giant formerly known as WeWork, most recently valued at $47 billion ahead of a January rebranding as the We Company, let go of 300 employees last week, according to The Real Deal‘s exclusive reporting. The layoffs, which sources said took place globally in its WeWork, WeLive and WeGrow divisions, are the largest by the company since its formation in 2010. A We Company spokesperson said the company has plans to hire 6,000 employees this year, or about 500 per month, to bolster its current head count of roughly 10,000. The SoftBank Group-backed firm, whose CEO Adam Neumann has come under scrutiny for personal investments that mirror those made by the We Company, last made major cutbacks in 2016. Sources told TRD that the latest force reductions have been positioned as being for performance-related reasons. [TRD]

Keller Williams credits tech expansion for 2018 deal surge
A week after Douglas Elliman and Realogy disclosed less-than-stellar financials for 2018, franchise brokerage rival Keller Williams has unveiled some key financial metrics that it hit last year. The Austin-based real estate company said that its agents in the U.S. and Canada closed $332.4 billion in sales volume during its most recent fiscal year, up 5.7 percent from 2017, as contract volume jumped 5.5 percent year-over-year, to $365 billion. Keller Williams declined, however, to disclose its net income or address a decline in franchisee profits. The company, whose CEO Gary Keller returned to its leadership ranks earlier this year, claimed that key investments in technology were paying off. Official agent count remained steady at 159,447, although Keller Williams is in the midst of purging potentially thousands of inactive agents. [TRD]

REITs benefit from Fed’s decision to keep interest rates steady
The Federal Reserve’s recent decision to keep interest rates where they are has been good for real estate investment trusts. Real estate stocks on the S&P 500 fell 5.6 percent in 2018, but have jumped by 12 percent since the beginning of this year as investors set their sights on REIT shares, the Wall Street Journal reported. “The surprising drop in yields and the drop in mortgage rates could potentially be another positive for housing and housing-related stocks going forward,” LPL Financial senior market strategist Ryan Detrick told the outlet. The Fed raised interest rates four times in 2018, but held off on another rate hike in January. [TRD]

MAJOR MARKET HIGHLIGHTS

New York’s Chrysler Building nears potential $150M sale
Aby Rosen, principal and co-founder of Manhattan-based real estate firm RFR Holding, is nearing a deal to acquire the iconic Chrysler Building, according to The Real Deal‘s exclusive reporting. A source with knowledge of the negotiations told TRD that the purchase price is “not much higher” than the $100 million estimate that the Commercial Observer reported the building could trade for, in part due to a ground lease on the landmarked property. The Chrysler Building’s current owners, an Abu Dhabi government fund and the developer Tishman Speyer, put the Art Deco-style office tower up for sale in January. CBRE Group is marketing the building, which saw the Abu Dhabi Investment Council cough up $800 million in 2008 for what would become a 90 percent stake in the tower. The Chrysler Building, hamstrung by a costly ground lease, could now sell for a reported $150 million, according to the Wall Street Journal. [TRD]

Silverstein Properties, Cantor Fitzgerald to raise $2B OZ fund
In one of the largest funds so far to target the Trump administration’s increasingly popular Opportunity Zone program, financial services firm Cantor Fitzgerald and real estate developer Silverstein Properties announced on March 7 that they had joined forces on a fund that they hope will raise $2 billion. The duo, which are both based in Manhattan, said they will target ground-up developments in primary metropolitan markets with a focus on industrial, hospitality, office and retail projects. The partnership between Silverstein and Cantor Fitzgerald is the latest in a series of moves by real estate firms and other investors seeking to capitalize on the OZ program. Earlier this week, Greenwich, Connecticut-based Belpointe Capital announced its plans for an OZ-focused real estate investment trust that it hopes will raise $3 billion within eight years. [TRD]

Michael Cohen sues Trump Org over $2M in unpaid legal fees
President Donald Trump’s former personal lawyer, fresh off testifying on Capitol Hill and suing two Chicago-based taxi medallion moguls over a $6 million condo loan in Miami, is back in court again. Michael Cohen has sued the Trump Organization for breach of contract over its alleged nonpayment on roughly $1.9 million in legal fees. Cohen claims the president’s namesake real estate company must reimburse him for legal costs he incurred as a result of investigations into Trump’s 2016 presidential campaign. Cohen’s lawsuit, filed in Manhattan by lawyers from Binder & Schwartz and Gilbert LLP, states that at various times he has been represented by the Blakely Law Group, Davis Goldberg & Galper, McDermott Will & Emery, Monico & Spevack and Petrillo Klein & Boxer. Cohen, who was disbarred in New York State last month, claims that the Trump Organization cut him off after he began cooperating with federal prosecutors. [TRD]

Top Miami broker teams merge at Coldwell Banker, rebrand
One of Miami’s top broker teams has left its home of 16 years to merge with another top team. Judy Zeder’s team has parted ways with Coral Gables-based EWM Realty International and is teaming up with Jill Hertzberg and Jill Eber’s group at Coldwell Banker. The new group will be called The Jills Zeder Group with Coldwell Banker. The families that comprise the two groups are longtime friends, Zeder said. “It’s a very unusual situation to have three families get along and like each other,” said Zeder, adding that they would be “working together for the benefit of the clients.” The two teams have closed a combined $5 billion in real estate sales since 2006. Eber and Hertzberg, known as “The Jills” in South Florida’s real estate market, saw a former Miami realtor who tried to extort them receive a jail sentence in February. [TRD]

Nashville-based office REIT mulling potential IPO
Priam Properties is thinking about going public in a move that would make the Nashville-based outfit the first real estate investment trust in the U.S. to pursue an initial public offering this year, Bloomberg reported. The office landlord “has held discussions with investment banks about selling shares as soon as this year,” the outlet reported, citing sources familiar with the matter. Priam generally focuses on “high-growth markets” in states such as Florida, Ohio and Tennessee. Its representatives didn’t return requests for comment about the reported IPO. Dallas-based Fathom Realty, a cloud-based brokerage founded in 2010 that operates on a 100 percent commission model, is another real estate firm reportedly considering an IPO this year. [TRD]

Chicago gets priciest resi sale of year as condo trades for $11.3M
Despite some areas along the southern shore of Lake Michigan sinking due to climate change, Chicago had its priciest residential sale of 2019, the Chicago Tribune reported. A 31st floor unit at No. 9 Walton, a luxury condo tower along the Windy City’s Gold Coast that has attracted business magnates and celebrities, sold for $11.3 million to an as-yet-unidentified buyer. Nancy Tassone of Jameson Sotheby’s International Realty had the listing for the four-bedroom, 7,100-square-foot condo unit, while Natasha Motev of Jameson Sotheby’s is advising the buyer. Hedge fund billionaire Ken Griffin, who made headlines earlier this year for a record-setting penthouse purchase in New York, paid $59 million in late 2017 to buy the top four floors of No. 9 Walton. That deal remains the most expensive residential transaction ever in the Chicagoland area. [TRD]

Compass acquires Alain Pinel Realtors to grow in Bay Area
A week after picking up customer relationship manager Contractually, Compass is expanding again. The New York-based brokerage announced on March 4 that it bolted on Saratoga, California-based Alain Pinel Realtors, which has 1,300 agents in 33 offices across Northern California, Inman first reported. Compass’ expansion in the Bay Area continues an acquisition spree it began in 2017 when the SoftBank Group-backed firm snapped up San Francisco-based Pacific Union International, which reported $14 billion in sales in 2017. The acquisition of Alain Pinel brings Compass’ agent count in the Golden State up to around 4,500. Compass CEO Robert Reffkin said in January that the firm doesn’t plan to expand into any new markets this year. [TRD]