Some of the biggest real estate stories of the past year revolved around the actions of two companies: WeWork and Amazon. With 2019 coming to a close, here are the stories that defined the year.
WeWork, the troubled unicorn
In January 2019, WeWork announced that it was rebranding as the We Company, which would serve as the parent company to a slew of other we-branded companies (WeLive, WeGrow, etc.) In fact, the company had registered at least 94 businesses and trademarks — mostly permutations of We”Something.” T’was a simpler time. Back then, the We Company’s central mission was just to “elevate the world’s consciousness,” not to figure out a way to survive.
In the past year, we’ve seen WeWork abandon plans for an initial public offering, have its $47 billion valuation cut by more than 80 percent and lay off thousands of employees. The eccentric face of the company, Adam Neumann, also stepped down, though he walked away with a consulting gig and $1.7 billion exit package. The saga continues as WeWork’s savior and biggest financial backer, SoftBank, struggles to finalize a bailout package for the co-working company.
The SoftBank stigma
WeWork’s woes have put the spotlight on SoftBank’s other investments. Now, SoftBank’s other investments are being called into question. Compass, the rapidly growing national brokerage was also boosted by a sky-high valuation —$6.4 billion — as it faces questions about profitability.
Katerra, too, is facing similar questions. A TRD investigation revealed that the company failed to complete roughly a dozen projects, and that some of its biggest clients are tied to its executives. This is a story that we will continue to follow in 2020 — and relive once the WeWork movie and book come out.
Amazon, the heartbreaker
Amazon announced in late 2018 that it would split its new North American headquarters between Long Island City and Arlington, Virginia. But on Valentine’s Day 2019, Amazon broke things off with Queens. Why? Because, according to the e-commerce giant, the elected officials weren’t supportive of the new headquarters (in large part, due to nearly $3 billion in state and city incentives offered to the company). In a statement, Amazon pointed to the fact that “a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.” Not to mention, Amazon reportedly kept a secret dossier titled, “NY Negative Statements,” a Microsoft Word document that detailed each time a public official said something against its Long Island City plans.
In the months following the ugly breakup, Amazon hasn’t quite cut off all ties with New York. They aren’t in the long-term, committed relationship that would’ve created 25,000 jobs, but the company has agreed to take 335,000 square feet at SL Green Realty’s 410 Tenth Avenue in Hudson Yards. Meanwhile, elected officials are working to figure out what to do in Long Island City in Amazon’s place.
Rent law freakout
In June, New York’s rent stabilization law was changed in several key ways. https://therealdeal.com/issues_articles/game-over/To put it simply, the means by which landlords are able to increase rents on regulated apartments were significantly curtailed and for the first time, these changes were made permanent (meaning they won’t be up for renewal in the next few years, as has previously been the case). The legislature eliminated vacancy decontrol and vacancy bonuses, and limited Major Capital Improvements and Individual Apartment Improvements. It also capped application fees at $20. The state stopped short of enacting good cause eviction, but that measure is expected to be picked back up next year.
At least three different federal lawsuits have been filed challenging the law on constitutional grounds, and more are expected. And landlords have already been finding ways to circumvent the new law.
In the next year, we’ll be watching multifamily investment activity and keeping track of how the rent law impacts tenants and landlords.
What soft market?
As the luxury market contends with oversupply — one in four new condos in the city remain unsold — 2019 saw some record residential sales. Ken Griffin set a new record for the priciest U.S. home sale, with the $240 million buy of a penthouse at Vornado Realty Trust’s 220 Central Park. Hedge funder John Griffin (no relation to Ken) set a new record in the townhouse market, with the $77 million buy of 30,000-square-foot mansion from financier Philip Falcone. And despite his breakup with Long Island City, Jeff Bezos made a huge commitment to Manhattan. The Amazon chief shelled out nearly $80 million for a three-unit spread at 212 Fifth Avenue.
But according to real estate experts, the record-shattering deals say more about the economy than the luxury market, which is still hurting. Plus, at luxury towers like 220 CPS, many condos went into contract years ago, meaning some units are closing for much more than they would in today’s market.
The Corcoran files
Documents leaked to every Corcoran agent in September offered a rare glimpse into commission splits, incentives used to lure agents and more. Though incomplete, the “hacked” documents provided insight into the health of Corcoran, which is said to be the most successful subsidiary of Realogy Holdings. TRD’s analysis of the documents tell the story of how Corcoran how it manages its talent at a time when the brokerage industry faces competition from new, well-funded rivals.
Realogy had a rough year. Its stock and market cap continued on a downward spiral, and it entered a very public — and messy — legal battle with competitor Compass. At one point, Compass even said that Realogy tried to sell itself — a claim which the brokerage conglomerate has denied.
And the Internet realized that Steve Ross owns a lot of things
Five months after Hudson Yards’ grand opening, Related Companies’ Steve Ross made headlines for another reason: He was hosting a $100K-a-plate fundraiser for President Trump at his Hamptons home. People freaked out because it turns out that Related owns Equinox and SoulCycle. (Actually, Ross owns a lot of things, but those were the ones people were focused on.) With the 2020 election coming up, it’ll be interesting to see how the incident with Ross impacts public displays of support among Trump’s real estate friends.