Los Angeles developer Elite Investment Management Group has filed for chapter 11 protection about a month after it was sued for fraud involving an unfinished Bel Air mansion, the Real Deal reported. The filing gave the location for the company’s principal asset as 10710 Chalon Road. In 2018, the Bel Air megamansion project was touted for its stratospheric price of $88 million. The unfinished mansion is the focus of the lawsuit against Elite Investment in Los Angeles Superior Court. The voluntary bankruptcy, filed Sept. 5, is intended to protect the company from creditors. It gave an estimated value of assets from $10 million to $50 million, with estimated liabilities in the same range. A telephonic meeting for creditors is scheduled for Oct. 4.
American Eagle is suing the owner of a prominent downtown San Francisco shopping center for allegedly failing to address safety and security concerns, claiming that it has “let the mall deteriorate into disarray,” the Washington Post reported. The clothing retailer says Unibail-Rodamco-Westfield, a commercial real estate firm, neglected the mall, including by failing to invest in security. A complaint filed Monday in the Superior Court of California for San Francisco County accuses the company of “allowing the mall to become a lightning rod for, in Westfield’s words, ‘rampant criminal activity.’” “American Eagle believed it was leasing a prime real retail space with a street-front entrance in Downtown San Francisco from one of the most established and reputable retail landlords in the country,” the complaint reads. But the neglect of Westfield San Francisco Centre left “American Eagle and its employees to suffer and respond to gun violence, physical assaults, burglaries, and robberies,” it adds. “This is not the store American Eagle paid millions of dollars for, or the store that Westfield promised.”
WeWork launched a renegotiation of its office leases globally, testing its leverage against landlords that stand to lose if the embattled co-working space provider goes out of business, WSJ Pro Bankruptcy reported. WeWork’s current lease liabilities are “dramatically out of step with current market conditions,” interim Chief Executive David Tolley said Wednesday. WeWork held calls with landlords to inform them that it would be seeking concessions on its office leases, which account for more than two-thirds of its operating expenses. The company last month raised doubts that it would continue as a going concern, citing its dwindling cash and market headwinds. Once among the world’s most valuable startups at $47 billion, WeWork recently installed several directors with bankruptcy and restructuring experience to its board. Some of its major creditors have held preliminary talks among themselves to explore a bankruptcy filing for WeWork. For years, WeWork succeeded by taking out discount long-term leases from landlords and subletting them at a markup to entrepreneurs and small businesses. That model is now threatening the company’s existence as work-from-home continues to sap interest in flexible office space. WeWork said last month that its ability to negotiate concessions from landlords in the next few months will determine whether the business survives as it faces weaker-than-expected demand and higher member churn. If WeWork is able to renegotiate a sufficient number of its high-cost office leases and bring down its cost of rent, the company may not need to file for bankruptcy and it could avoid restructuring its debts. Since the end of 2019, WeWork has amended or canceled hundreds of its leases, resulting in an estimated reduction of $12.7 billion in fixed lease payments, according to securities filings.
Bank OZK had two branches in rural Arkansas when chief executive officer George Gleason bought it in 1979. The Little Rock lender today has billions of dollars in commercial real-estate loans, including for properties in Miami and Manhattan, where it is helping fund the construction of a 1,000-foot-tall office and luxury residential tower on Fifth Avenue. Regional banks across the country followed a similar playbook, gorging on commercial real-estate loans and related investments in big cities over the past decade, the Wall Street Journal reported. With the commercial real-estate market now in meltdown, those trillions of dollars in loans and investments are a looming threat for the banking industry — and potentially the broader economy. Banks’ exposure is even bigger than commonly reported. The banks are in danger of setting off a doom-loop scenario where losses on the loans trigger banks to cut lending, which leads to further drops in property prices and yet more losses. Bank OZK hasn’t pulled back from lending, but it has started to see some signs of market trouble. In January, a developer defaulted on a roughly $60 million loan from Bank OZK after construction costs escalated, the bank said. The loan was considered relatively safe because it was far below the building site’s value of $139 million in 2021. In December, a new appraisal put the property’s value at $100 million.
The U.S. Federal Deposit Insurance Corporation (FDIC) is seeking buyers for the $33 billion commercial real estate (CRE) loan portfolio of failed New York lender Signature Bank, Reuters reported. The majority of the portfolio comprises multi-family properties primarily located in New York City, the regulator said, adding that it would be marketing the asset over the next three months. The FDIC has been seeking to sell off portions of Signature, one of three larger banks that failed in the spring, since the bank was closed in March after an exodus of depositors seeking higher returns and safer institutions. Later that month New York Community Bancorp agreed to a deal with the FDIC to buy most deposits and certain loan portfolios along with all 40 of Signature's former branches. Within the CRE portfolio is about $15 billion of loans secured by residences that are rent stabilized or controlled. Since the FDIC has a legal obligation to preserve existing affordable housing for lower-income people, the agency said that it planned to place all those loans within joint ventures in which FDIC would retain a majority equity interest.
America’s suburbs are posting the country’s fastest-rising rents, a sign that the recent migration of families from major cities is starting to look more long-term, the Wall Street Journal reported. Many white-collar workers with remote jobs moved out of city apartments for roomier accommodations during the early months of the pandemic in 2020. Now, high mortgage rates and home prices are keeping some of the same families renting for longer periods. A rise in crime and homelessness in several big cities has some renters looking to the suburbs. The trend is propping up rents and fueling concerns about rental affordability in suburban areas, leading some governments to pass new rent-control measures in response. Rents in suburbs had climbed 26% through this past July since March 2020, 8 percentage points higher than the gain in urban cores, according to a report from rentals website Apartment List. Suburban rent growth was greater than its urban counterpart in 28 of the 33 metro areas studied, the company said.
In the emerging post-pandemic era, most aspects of life have returned to normal. Moviegoers are flocking to cinemas, vacationers jammed airports for summer travel and kids are returning to classrooms. The one thing that has remained stubbornly fraught: the world of work. Three and a half years after millions of office-goers were sent home en masse, companies, employees and governments are still figuring out how to adapt to lasting changes to corporate life, Bloomberg News reported. But stark differences have emerged across continents and cultures, with Asian and European workers largely returning to offices at a faster pace than their counterparts in the Americas. Asian nations did a better job keeping COVID-19 under wraps in the pandemic’s first year, so people there didn’t get as accustomed to working from home, making it easier to transition back to office life, researchers found. Europe’s habits vary widely — the UK has one of the highest rates of remote work, and France one of the lowest — but several of its countries also are leading the way with laws enshrining flexible schedules. Then there are places such as the U.S., where policymakers have stayed largely silent, leaving bosses and employees to navigate the changes on their own. As the post-Labor Day period marks a time of resuming normal schedules after summer vacations, companies including Amazon.com Inc. and even Zoom Video Communications Inc. are cracking down on getting workers back to offices for at least part of the week. But even then, workers are facing vastly different policies depending on their companies, managers or location. Goldman Sachs Group Inc. wants staff in five days a week. At Walt Disney Co., it’s four days; for Amazon, Google and many others, it’s three. Hybrid schedules are now the norm for office goers in the world’s largest economy.
The cost to rent a home or apartment has soared, and it isn’t just because of super high rents. Landlords are hitting tenants with an abundance of fees every month, the Wall Street Journal reported. Many are no more than five or 10 bucks each, but when stacked up they can amount to hundreds of dollars more each year. Some fees, such as those for parking and pets, have been around for years, but many renters now pay up for things they were rarely charged for in the past. That includes fees for trash pickup, pest control, the use of a mailbox, and for making routine maintenance requests. Then there are fees for move-ins and move-outs and for “lease administration.” One Minnesota landlord collected a $100 so-called January fee the first month of each year, though it isn’t clear what tenants got in return for that charge. In suburban Phoenix, buildings increasingly charge for valet trash pickup that can add more than $30 to the monthly rent. “I can carry the trash 50 feet to the dumpster,” said Debbie Giannecchini, who moved out of a building that started charging the fee. Apartment asking rents rose 25% between early 2021 and summer 2022, straining the budgets of many renters whose wages didn’t keep up. While rent growth has since flattened in much of the country, large property-investment companies continue with these add-ons to boost their bottom lines. The five largest single-family-home rental landlords increased their annual fee income per lease by about 40% between 2018 and 2021, according to a report last year from the House of Representatives’ Committee on Financial Services, which obtained fee data from the companies.
More than three years after filing for bankruptcy protection amid mounting claims of child sex abuse by local clergy, the Archdiocese of New Orleans is preparing to sell off seven properties — including the shuttered Sacred Heart of Jesus Church, the St. Jude Community Center and the Catholic Bookstore Uptown — as a way to generate cash that could be used to help settle those claims, NOLA.com reported. In court documents filed this week, the archdiocese is seeking court approval to hire commercial real estate broker The McEnery Company to market the properties. If sold for their proposed asking prices, the properties would generate nearly $10.4 million for the local Roman Catholic Church. That’s likely a drop in the bucket relative to the cost of the bankruptcy process and the claims an estimated 500 or so abuse victims are seeking. Attorneys fees and other costs of the bankruptcy process have already totaled some $25 million, while the total amount of money victims are seeking has yet to be tabulated. It’s also still unclear how many victims will be allowed to file claims because of a 2021 state law that has extended the window to allowing alleged victims of clergy sex abuse to file suit. Until those questions are resolved, the chapter 11 reorganization plan cannot be finalized. Selling off the properties, however, is a first step. “The Archdiocese of New Orleans has stated since filing for chapter 11 reorganization that we anticipated property sales would be part of the proceedings,” archdiocese spokesperson Sarah McDonald said.
