Sunday Summary: I Wish They All Could Be California Deals
By The Editors September 24, 2023 9:00 am
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Jann Wenner did not have a good week.
The legendary editor of Rolling Stone magazine was out promoting his new book, The Masters, a compendium of interviews with seven of his favorite rock stars (or, in his portentous words, “philosophers of rock”) and in the course of talking to a New York Times reporter he was asked why everyone chosen for the book was male and caucasian.
“Insofar as the women, just none of them were as articulate enough on this intellectual level,” Wenner said.
Dude?!?
He proceeded to dig himself in deeper when he said that Stevie Wonder, Marvin Gaye and Curtis Mayfield “didn’t articulate at that level.” (One can appreciate the irony that when Wenner tried to extricate himself from the mess he was not exactly articulate himself.)
Much condemnation followed, along with his ouster from the board of the Rock & Roll Hall of Fame, which Wenner co-founded.
But one thing did go right this week for Wenner (or, at least, for his publication): the real estate.
Penske Media Corporation — which owns Rolling Stone along with Variety and The Hollywood Reporter — took a 12-year, 125,000-square-foot lease at the 3.6-acre Lumen office campus at 11355 West Olympic Boulevard in Los Angeles.
And maybe there was something in the air, but it felt like there were a lot of reasons to pay attention to Southern California last week.
Aside from the Penske deal, Brookfield (BN) plunked down $72 million for just under 40 acres of land in Rialto, in San Bernardino County.
Over in Chino Hills, Costco purchased a 186,000-square-foot retail property at 13251 Peyton Drive for $37.5 million.
And in Orange County, TruAmerica Multifamily laid out $103 million for a 264-unit property called Nineteen01 at 1901 East First Street in Santa Ana.
All of which is fine and good, but the thing that we at Commercial Observer got most excited about was the release of our Power L.A. list.
This 30-entry list (along with one honorable mention) is one of our signature issues of the year and tries to tell the complete story of Los Angeles’ real estate through the guise of the city’s most powerful players — from studio moguls, to multifamily developers, to politicians, to the strikers in the writers and actors guilds.
It’s worth a nice deep perusal on this Sunday.
But before you do that…
It’s not as though there wasn’t a lot going on in New York, too.
On Sept. 21, Mayor Eric Adams rolled out a dramatic proposal for zoning changes which, if implemented, could add some 100,000 homes over the next decade.
Adams’s proposal involves a zoning bonus to buildings that include 20 percent affordable units in their plans, allowance for SROs (for the first time in a half century!) and allowing large Mitchell-Lama and other affordable housing complexes to build new housing.
“Half of all New Yorkers today are rent burdened,” Adams said at the press conference announcing his plan. “What we’re proposing will benefit every neighborhood and every New Yorker. This is what the ‘City of Yes’ looks like — yes to more density, more flexibility and sustainability.”
And, for good measure, three days earlier Adams and Sanitation Commissioner (and real estate scion) Jessica Tisch announced another salvo in their war against rats — namely that all commercial trash in the city must be set out in secure, lidded containers starting March 1, 2024.
Better off Fed
In case we didn’t mention it: The Fed met. The Fed saw. The Fed didn’t raise rates.
This was no doubt a very big relief to people in real estate who have been bristling under hike after hike. But that doesn’t mean there won’t be any more pain before 2024.
“We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2 percent goal over time,” Fed Chairman Jerome Powell said at the post-meeting press conference. “We are prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we are confident that inflation is moving down considerably toward our objective.”
Moreover, 12 of the 19 Fed board members project another interest rate hike this year. And until there is some sense that rates are stable, transactions will likely remain sluggish at best.
“Once the market believes the Fed is done increasing rates, it will feel more confident about price discovery and transactions getting done,” Ryan Severino, chief economist and head of U.S. Research at BGO, told CO. “We aren’t there yet, and inflation might hold a few surprises for us, but we are getting closer to the clarity the market craves.”
Sunday reading
In addition to Power L.A., there were two stories last week that we think real estate junkies should linger over today
For our Florida watchers, CO dove into the four-year effort by Jeffrey Soffer to purchase the Diplomat hotel for some $835 million. It involved wooing politicians, battling rivals, and more. (Soffer’s $272 million yacht and his friend Tom Brady make cameo appearances in the story.)
A look at New York City’s migrant crisis and how the real estate industry is being co-opted into efforts to address it is considerably more solemn.
Thousands of hotel rooms have already been turned into shelters, but this is probably not an efficient or sustainable solution to the city’s migrant crisis.
“The best way to get these folks housed is to get them a housing voucher so they can pay their rent in the private sector,” said Christine Quinn, the former speaker of the City Council, who now runs homeless services organization WIN. “Housing vouchers are the cheapest way to house people — $72 a night. Hotels, where you get the least amount of service — $383 a night. Why would we want to spend more and get less, and not get permanent housing? We could save about $3 billion.”
Something to think about.
See you next week — and if you observe Yom Kippur, have an easy fast tomorrow!
