National Cheat Sheet: US home sales drop again, JLL acquires HFF for $2B… & more

By Maya Rajamani | March 22, 2019 08:00AM

Clockwise from top left: The Federal Reserve has held interest rates steady and indicated that they will not rise this year; Facebook revamps its housing ad policy after settling discrimination lawsuits; JLL buys HFF in a $2B cash-and-stock deal that it hopes will ‘accelerate growth;’ and a Re/Max report finds the U.S. set for a ‘significant shift’ as home sales decline and inventory grows.

Report: ‘Shift’ as US home sales decline, inventory grows
U.S. home sales continued to fall in February, dropping 4.2 percent, even as inventory grew by 5.8 percent, according to a new report from Re/Max. The decrease in home sales marked the seventh consecutive month of declines year-over-year, although the increase in inventory was the fifth month in a row of growth, the report said. Trends that last five months or more “often indicate significant shifts,” said a statement from Re/Max CEO Adam Contos. “Year-over-year trends in declining sales and rising inventory have both reached that length now,” he added. Homes in San Francisco and Omaha, Nebraska, were on the market for the least amount of time at 37 and 34 days, respectively, according to the report. [TRD]

JLL buys HFF for $2B in effort to ‘accelerate growth’
Chicago-based JLL announced this week a $2 billion cash-and-stock deal to acquire Dallas-based HFF. The proposed combination, which could usher in a period of poaching as rival commercial brokerages seek to attract individuals displaced by the union, values HFF at $49.16 per share based on its March 18 market closing price. The merger, which should be finalized in the third quarter of this year, still requires HFF shareholder approval, but already has the assent of both companies’ boards. “The combination with HFF provides a unique opportunity to accelerate growth and establish JLL as a leading capital markets intermediary, with outstanding capabilities,” said a statement from JLL global CEO Christian Ulbrich. JLL and HFF are both in the top 10 in The Real Deal‘s recent ranking of investment sales firms. [TRD]

Opendoor valuation hits $3.8B after funding round
San Francisco-based startup Opendoor, which has sought to make a name for itself in the iBuyer space, has raised $300 million in a funding round led by General Atlantic, Fifth Wall Ventures, GGV Capital, Hawk Equity and Japan’s SoftBank Group, according to TechCrunch. The outlet noted the move brings Opendoor’s valuation to $3.8 billion. Founded in 2014, Opendoor has since raised $1.3 billion in equity, with another $3 billion in debt financing to purchase properties. The company, which received a $400 million investment from SoftBank late last year, plans to use its latest round of funding on product development and expansion. Opendoor co-founder Eric Wu told TechCrunch that his company intends to remain focused on the private home buying market, rather than cars, commercial real estate or loans[TRD]

Facebook settles lawsuits, revamps housing ad policy
Online housing advertisements will no longer target Facebook users by ZIP code, the Wall Street Journal reported. A new policy enacted by the social media giant will also set a 15-mile minimum radius for geographic ads and restrict housing, job and lending ads from targeting users by age and gender. Facebook is making the changes to settle five discrimination lawsuits filed by plaintiffs, including the National Fair Housing Alliance. “There is a long history of discrimination in the areas of housing, employment and credit, and this harmful behavior should not happen through Facebook ads,” company COO Sheryl Sandberg wrote in a blog post. [TRD]

Fed holds interest rates, indicates no raises this year
The Federal Reserve isn’t raising interest rates right now, and will most likely hold them steady for the rest of the year due to concerns about an economic slowdown. In 2018, the Fed raised rates four times. In minutes this week, officials indicated that 2020 will only see one rate raise. The decision reflects a relatively recent change of mind on behalf of top Fed officials. At the end of last year, only two two officials said they thought the Fed would keep interest rates unchanged in 2019, as opposed to 11 out of 17 right now. The Fed also plans to scale back its plan to downsize its portfolio of government-backed securities. Low interest rates have been a boon to real estate investment trusts and could lead to more demand for mortgages from Freddie Mac, a government-sponsored entity that the Trump administration is considering privatizing. This week Freddie Mac promoted president David Brickman to CEO. [TRD]

MAJOR MARKET HIGHLIGHTS

Manhattan’s Hudson Yards development officially opens
A star-studded extravaganza of business moguls, celebrities, developers, elected officials and even Big Bird turned out last week to celebrate the grand opening of Hudson Yards on Manhattan’s West Side — first at an invite-only evening soiree on March 14 and again at a ceremony the next morning. New York Sen. Chuck Schumer called Related Companies chairman Stephen Ross the “only person in the universe” who could have brought the decade-long development to fruition. Ross, meanwhile, said he was “still awed” to see the project become a reality. Since the opening, critics have raised concerns about Related’s use of surveillance in the neighborhood, as well as its controversial policy regarding photos taken from a 15-story climbable sculpture known as “The Vessel.” [TRD]

Boston, LA touted as top cities to endure economic downturn
Among the cities that could remain among the most resilient amid the country’s economic slowdown is Boston, one of several places that investors have set their sights on that are less likely to feel the effects of a downturn, Bloomberg reported. Boston is considered a less riskier investment because it has a traditional financial services base, as well as a biotechnology and life sciences sector, according to the outlet. Los Angeles is another city that’s drawing in investors due to its media and technology industries. Cities such as Austin, Texas, which rely predominantly on a single industry or company, are considered riskier places to invest. [TRD]

ISG founders resolve acrimonious partnership dispute
Two founders of Miami-based luxury brokerage International Sales Group have officially parted ways after settling dueling lawsuits last month. Philip Spiegelman had accused Craig Studnicky of mismanaging “large amounts of cash,” while Studnicky had claimed Spiegelman pushed out a third founding partner of ISG and alienated clients with his “overbearing narcissism and obnoxious personality.” The litigation initially left the future of the brokerage up in the air, but Studnicky’s lawyer Robert Stok said the two have “reached an amicable resolution.” Stok’s client will take over ISG, while Spiegelman will get development rights to a mixed-use project in New Orleans. [TRD]

Michigan nonprofit moves into OZs in Florida
The Troy, Michigan-based Kresge Foundation is the latest entrant in the race to reap the benefits from federal Opportunity Zones. The philanthropic group, a registered nonprofit, has partnered with Boston-based Arctaris Impact and Fort Lauderdale-based Community Capital Management to launch an OZ-focused fund. Kresge has provided a combined $22 million to both funds, which have agreed to adhere to certain investment guidelines, such as deploying capital to create jobs and help low-income communities. OZs allow investors to defer paying capital gains taxes if they invest in specially designated geographic areas. U.S. Housing and Urban Development Secretary Ben Carson told The Real Deal earlier this month that he would give preferential treatment to OZ developers and investors that build affordable housing. [TRD]

PMG to bring another co-living complex to Chicago
Property Markets Group plans to open another co-living rental complex in Chicago, principal Noah Gottlieb told The Real Deal. The New York-based developer, which started its co-living unit in 2017, has already opened two “X Social Communities” complexes in the Windy City and one complex in Miami. New apartment buildings are in the works in Denver, Oakland, Phoenix and several cities in Florida, and the group is eyeing Atlanta, Houston and Minneapolis for future projects, Gottlieb said. Beds start at $995 per month in PMG’s “X Chicago” building in the University Village neighborhood. [TRD]

Santa Monica’s Clock Tower Building sells for $58M
Sorgente Group of America has sold the historic Clock Tower Building in Santa Monica to Rockwood Capital for $58 million. The 53,500-square-foot Art Deco tower, which opened in 1930, was the tallest building in the beachfront city for four decades. It’s considered Santa Monica’s first skyscraper and is also still one of the tallest buildings in the vicinity due to height restrictions. The building, which has a four-story clock tower, is currently home to Chinese digital media company Hylink, investment firm Bold Capital Partners and H Code media, among other tenants. Italy’s Sorgente Group, whose other properties include the Flatiron Building in Manhattan, bought the Clock Tower Building in 2013 for around $34 million. [TRD]