National Cheat Sheet: House flips hit pre-crisis levels, ‘cannabiz’ entices the real estate sector… & more

By Maya Rajamani | April 12, 2019 08:30AM

Clockwise from top left: China Vanke in “early stage” talks to take its property management business public, report finds that U.S. house flips have hit near pre-financial crisis levels, ‘Opendoor Agent Partner Program’ marks a pivot back to humans and Brooklyn’s Williamsburg neighborhood bounces back following the reversal of this month’s scuttled L train shutdown.

Report finds house flips returning to pre-financial crisis levels
House flipping is still almost as prevalent as it was before the 2008 financial crisis, but it’s not the harbinger of doom it was then, the Wall Street Journal reported. Housing analytics firm CoreLogic found that 10.6 percent of U.S. home sales during the fourth quarter of 2018 were flips, a percentage not far from an 11.3 percent house flip rate in 2006. But house flippers “are very different today than they were in the past,” CoreLogic deputy chief economist Ralph McLaughlin told the outlet. “Even though we see hype and hysteria in popular culture, this isn’t necessarily something to worry about.” [TRD]

Savvy real estate investors eye ‘cannabiz’ opportunities
While marijuana and commercial real estate don’t seem like a pair of fields that would make a great mix, an increasing number of investors from the latter are looking seriously at the potential offered by the former should legalization become more widespread throughout the country, The Real Deal reported. Justin Ehrlich, a founding of New York-based Churchill Real Estate Holdings, owns a stake in pot industry bible “High Times” magazine, as well as legal weed outfits in Los Angeles and elsewhere. TRD noted that Ehrlich is one of several notable real estate executives monitoring marijuana-related events as certain states move to loosen restrictions on the controlled substance for medicinal and recreational uses. [TRD]

HBO show says PE firms bad news for mobile home owners
Mobile home owners who rent the land their houses sit on are getting pushed out of mobile home parks by rising rents, according to a report from HBO’s “Last Week Tonight with John Oliver.” Private equity firms have set their sights on mobile home parks across the country, and rents typically go up when they buy them, forcing some owners to either move their homes or abandon them due to high moving costs. Mobile homes also depreciate in value over time. “Mobile homes may be a terrible investment for people buying them, but they’ve been an incredible investment for Warren Buffett,” John Oliver said. Clayton Homes, owned by Buffett’s Berkshire Hathaway, is the largest manufacturer of mobile homes in the country. [TRD]

Zell bemoans dying breed of real estate ‘jungle’ entrepreneurs
Tough-talking billionaire Sam Zell, chairman of Chicago-based Equity International Group, said that within the last three decades the real estate industry has gone from a “very jungle, entrepreneurial environment” to one that is more “institutionally driven.” Zell’s remarks, which came last week at New York University’s annual REIT symposium, also saw him put forth himself and Boston Properties co-founder and chairman emeritus Mortimer Zuckerman as among the few remaining individuals in the old guard, “entrepreneurial” crowd. “We’ll be a nice footnote,” he quipped. Zell’s comments came as one key institutional investor in the real estate sector, BlackRock, shook up its executive ranks. [TRD]

Is ‘Opendoor Agent Partner Program’ a pivot back to humans?
Opendoor plans to refer some of its seller clients to outside partner real estate agents, according to Inman — less than a month after the iBuyer startup’s CEO Eric Wu said that “automation will happen,” adding that agents’ would only be “an adviser to the customer.” The startup’s new “Opendoor Agent Partner Program” will pair sellers whose properties don’t meet Opendoor’s all-cash offers requirement with “Agent Partners.” Those so-called agent partners will fork over a referral fee that averages 1 percent of the property sale price when a sale closes, Inman reported. [TRD]

MAJOR MARKET HIGHLIGHTS

Brooklyn nabe bounces back after subway shutdown reversal
News that New York City’s L subway train wouldn’t be shutting down after all in April has sent prices and interest in Brooklyn’s Williamsburg neighborhood shooting back up, a number of real estate industry sources told The Real Deal. The market in the hipster haven took a hit after the Metropolitan Transit Authority said in 2016 that it would have to close for 15 months part of the tunnel that the L train runs through for repairs, but picked back up soon after news broke that the closure wouldn’t be happening after all. “Literally 24 to 48 hours after the announcement that Cuomo made — overnight — people showed up and started signing leases,” TerraCRG founder and CEO Ofer Cohen told TRD. [TRD]

Brazil tops list of foreign investors buying in South Florida
Investors from Brazil bought more homes in South Florida last year than investors from any other country, according to a new report from the Miami Association of Realtors. Brazilians were behind 12 percent of all foreign home purchases in the tri-county region, putting them in the top spot on the association’s ranking. Colombia and Venezuela shared the second spot, representing 11 percent each. This is the first time Brazil has taken the top spot since the association started ranking foreign investments in 2012. International buyers shelled out a total of $8.7 billion on residential properties in the three counties last year, up 22.5 percent from 2017. South Florida, as previously noted by TRD, has long been a hotspot for foreign real estate investment. [TRD]

JPMorgan sells majority stake in wavy Chicago tower
An Ares Management fund has agreed to acquire JPMorgan Asset Management’s majority stake in the rental portion of a mixed-use Chicago tower, The Real Deal reported. JPMorgan unloaded the stake in wavy Jeanne Gang-designed Aqua Tower for nearly $190.5 million, property records show. The 86-story tower, which houses 474 apartments and 224 condos, is currently the tallest operating tower in Magellan Development Group’s Lakeshore East district and the ninth-tallest tower in Chicago, though that latter honorific will soon go to another building, the 101-story Vista Tower. JPMorgan Asset Management reportedly paid $182 million back in 2010 for the majority stake in the Aqua Tower. [TRD]

Netflix could buy Hollywood’s historic Egyptian Theatre
Technology giants are transforming the real estate landscape in Los Angeles, and now Netflix could be poised to acquire the iconic Egyptian Theatre on Hollywood Boulevard. The streaming media services provider is currently in talks to buy the landmarked theater, which is currently owned by the nonprofit group American Cinematheque, Deadline reported. As part of the deal, Netflix and American Cinematheque would split the theater’s operation, with the former operating it on weekdays and the latter operating it on weekends. Netflix would premiere some of its own films at the theater, according to the outlet. American Cinematheque bought Egyptian Theatre from the city of Los Angeles for $1 in 1996. [TRD]

Chinese developer mulls IPO for property management biz
China’s largest developer is considering a potential initial public offering for its property management business, Bloomberg reported. Shenzhen-based China Vanke has talked with advisers about listing its property management business in a move that could happen next year and raise up to $1 billion. China Vanke would follow in the steps of other Chinese developers, such as Foshan-based Country Garden Holdings, in taking its property management unit public. But talks are still at an early stage, and a representative for China Vanke’s property management unit told Bloomberg that there aren’t any plans for a listing at present. Vanke snapped up a 5 percent stake in Cushman & Wakefield before its own IPO last year. [TRD]

Toronto sees spike in Chinese real estate investment
After a crackdown on foreign home buyers in British Columbia, Chinese real estate investors are setting their sights on Toronto, according to Bloomberg. Chinese investment in foreign real estate retreated in 2018, and in Vancouver it dropped off as several new taxes went into effect, Bloomberg reported. Toronto, however, saw an uptick in investments from Asia, according to the outlet. Investors are “looking at Toronto now because they’re seeing a better arbitrage on that than they are [in Vancouver],” Avison Young’s Bal Atwal told Bloomberg, which noted that part of Toronto’s increased allure is its growing technology and financial services sectors. [TRD]