New Development in West Hollywood at French Market Place

New Development in West Hollywood at French Market Place

From: CurbedLA

Last spring, word came that a West Hollywood fixture, French Market Place, would close for a “renovation,” but our friends at Eater found that workers’ rumblings suggested a more permanent closure was on the horizon. Turns out, they were right. At a public meeting next month, prolific local developer Jason Illoulian of Faring Capital will present his company’s plans to redevelop French Market Place and an adjacent building that once housed the Voyeur and DBA clubs, reports WeHoville; Faring Capital bought the properties earlier this year. The gist is that the DBA building will stay and the French Market space will be replaced by a mid-rise mixed-user with space for restaurant, retail, and offices.

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The Arts District, just east of downtown LA has become one of the hottest real estate markets in Los Angeles.  About 30 years ago, artists who were being priced out of areas like Santa Monica, Silverlake and other artsy areas of LA found that the old factory lofts in the district were reasonably priced and would make good artists lofts.  Now it is a trendy up and coming area.  RENTV has produced a film of the area.  If you have interest in this part of Los Angeles, spend a few minutes watching this video.




Fed Makes Long-Awaited Move; End of an Era, Signal of Confidence

  • The U.S. economy passed a major psychological threshold as the Federal Reserve closed the door on the extraordinary measures put in place to combat the financial crisis. With the quarter-point increase of its overnight lending rate, the Fed signaled that the economy has finally returned to normal operating levels. Though some sectors still face headwinds, broader economic measures including employment, retail sales and even home prices have largely returned to healthy performance standards. The Fed’s policy-setting committee reiterated that it will maintain a gradual pace of rate increases, aligning actions with key indicators such as labor market conditions, inflation, and international developments.
  • While short-term lending will be influenced by the Fed’s move, long-term interest rates will face little upward pressure in the immediate future. During 2016, the cost of long-term debt could see upward pressure, but this will be influenced as much by domestic and international confidence as by the central bank’s actions.
  • The move by the Federal Reserve will likely benefit commercial real estate investors, more because of the message it conveys than the influence of the rate change itself. By raising the rate for the first time since 2006, the Fed
    has finally expressed its confidence in economic growth, potentially opening the door to increased consumption and business investment. These positive trends would benefit all commercial real estate sectors as household formations escalate and increased discretionary income supports the demand for housing, retail goods, and business services.
  • The tempo and sustainability of economic growth that swayed the central bank represent a decidedly positive development for the office sector and industrial properties will also benefit from this trend. Additional hiring will generate new office space demand and put downward pressure on vacancy. Also, incremental demand may also emerge in interest-rate-sensitive financial services businesses, contributing to a projected decrease in the U.S. vacancy rate next year. In the industrial sector, a more robust pace of economic growth stemming from higher consumption will stimulate additional space demand from retailers. However, the rate increase will likely also strengthen the dollar, restraining U.S. companies with significant export business.
  • A solid pace of household creation accompanies an economic expansion and will generate new demand for apartments in the near term. U.S. apartment vacancy will fall this year to 4.2 percent and will rise nominally in 2016 as elevated completions narrowly outpace net absorption. Also, the Fed’s benchmark rate most directly affects consumer borrowing for items that include residential mortgages. Any additional tightening in monetary policy that suppresses the purchase of single-family homes and maintains a low rate of homeownership will provide a supplemental lift for the multifamily sector.




Congress Extends EB-5 Investor Visa Program Until Sept. 30, 2016 Without Changes


After much speculation and debate, the U.S. Congress has extended EB-5 U.S. Investor Visa Program until September 30, 2016. As recently as last Monday December 14, 2016, the draft legislation would have raised the minimum investment required in Targeted Employment Areas to $800,000 from the current $500,000 and also would have implemented a new $10,000 filing fee per investor but the draft fell apart last minute.

Thus, on December 15, 2016, Congressional leaders finalized the legislation and the current provisions the EB-5 program will continue as is without any changes.

While we would have liked to see some permanency to the EB-5 investor visa program with meaningful changes, this is certainly good news for investors that took the wait and see approach and that have been on the fence about investing for U.S. immigration purposes.



Commercial real estate jargon is second nature to practitioners, but it probably sounds like a foreign language to occupants who are negotiating their first lease or purchase.


This column is designed to provide a “one-stop glossary” for those terms most commonly used in “the trade.”

NNN: Also called “triple net,” this refers to the way property taxes, property insurance, and maintenance of the foundation roof and walls are paid by the tenant. Generally, these sums are paid as due and are “net” of the base rent – in addition to – but in some cases, the owner will collect a monthly estimate of the annual expenses in addition to base rent.

Modified Net: Similar to NNN but one or two of the “n’s” are included in the base rent.

Gross: Property taxes, property insurance, and maintenance of the foundation, roof and walls, and other maintenance of the property are included in the base rent. Gross lease rates are generally higher than NNN lease rates.

Industrial gross: Similar to “gross,” but in this case the tenant is generally responsible for some property maintenance in addition to base rent. These leases include a “base year.”

Modified gross or MG: Property taxes, maintenance of the foundation, roof and walls, property insurance, or other maintenance of the property are paid in addition to base rent.

Full service gross or FSG: This is generally an “office” term and refers to the gross expenses plus janitorial and utilities included in the base year. These leases have an “expense stop” and a “base year” for expenses.

Base year: Used in FSG, MG, and industrial gross leases, this is the first full year of the lease. The tenant pays increases in expenses over the base year.

Expense stop: Used in a FSG lease, the expenses of the base year (first full year of the lease) are calculated and the tenant pays increases above this “stop.”

Lessor: Landlord or property owner

Lessee: Tenant or entity that leases or rents the location

SubLessor: Tenant

SubLessee: Subtenant

Master lessor: Property owner

CAM: Refers to common area maintenance and is generally in addition to base rent and commonly found in MG, or industrial gross leases

TIs: Tenant improvements

Bumps: Increases in the base rent that occur throughout the term of a lease

COLA: Cost of living adjustment

ROFR: The right of first refusal is a tenant’s right to buy the property in the event an acceptable offer (from another party) is received by the owner.

ROFO: The right of first offer is the tenant’s right to submit an offer in the event an owner decides to sell the property.

Option to renew: A tenant’s right to extend the term of the lease at pre-negotiated points.

Option to purchase: A tenant’s right to purchase the property at pre-negotiated points.

LOI: A letter of intent expresses, in a nonbinding fashion, the occupant’s desire to lease or purchase the property.

Due diligence: A period of time negotiated in a purchase and sale agreement for the purpose of studying the property to determine its suitability for financing, occupancy, title, etc.

Loan contingency: A period of time used for securing financing.

Prelim: A preliminary title report outlines matters of record – loans, ownership, recorded easements, liens, etc.

Free rent: A period of a lease that is free.

Abated rent: In the event of tenant default, an owner can sue for repayment of abated rent.

NOI: Net operating income is the rent on the property, less any expenses stated on an annualized basis.

Cap rate: The NOI divided by the purchase price.

Congratulations! You now can speak commercial real estate.



Source: What’s a ‘bump?’ A ‘base year?’ Get wise to commercial real estate jargon – The Orange County Register



Sam Zell was recently interviewed on Bloomberg’s “GO” TV.  The beginning of the post are some selected quotes from the interview.  I also provide a link to the full transcript.


By Mike “Mish” Shedlock

Wednesday morning, Sam Zell, billionaire chairman at Equity Group Investments, spoke with Stephanie Ruhle and David Westin on Bloomberg’s “GO” TV.

Zell discussed a wide variety of topics from the Federal Reserve rate hike, the risk of a near-term recession, real estate, energy, and various foreign investment ideas. The interview was before the Fed announcement.

I put a spotlight on some interesting Zell ideas. Everything below is a selected quote except for two comments by me in braces[].

Twenty-Two Ideas

  1. Economy: High probability that we’re looking at a recession in the next 12 months.
  2. Rate Hike: Interest rate hike is probably 6 or 8 months too late. I think that the economy is closer to falling over than it is to going up.
  3. US Dollar: Devalued currencies make it very difficult for the US to compete internationally.
  4. World Trade:  World trade is slowing. Currencies continue to be manipulated. You’re looking at the beginnings of layoffs in multinational companies. Weakness is going to be pervasive.
  5. Global Deflation: You can’t put aside China. You can’t put aside Europe. If China’s numbers turn out not to be as accurate as we think, China could go into a recession. That’s about as deflationary a scenario as you could possibly come up with. And one that would for sure impact growth and affect Janet Yellen’s decision.
  6. Fed Tools: “Uh” …  [as in the Fed has none]
  7. Asset Prices: Assets will get cheaper.
  8. Cash: With zero interest rates the penalty for holding cash is not very significant.
  9. Stock Market: Nothing cheap. A number of falling knives that have been obfuscated by Amazon and Facebook et cetera. If you take out those stocks, the stock market isn’t doing real well.
  10. Mexico:  Mexico is terrific. I think there’s extraordinary opportunity there.
  11. China: I don’t think China is growing as fast as it reports to be. And I think that the world has a significant deflationary risk coming from a slowdown in China which I think would impact the cost of goods all over the world.
  12. Brazil: Brazil is obviously suffering significantly. On the other hand, as an investor I’m always looking at where nobody else is willing to go. We’re there already and under the right set of circumstances wouldn’t have any problem investing in Brazil today. I just think you can’t lose sight of the fact that this is a country with 180 million people. It’s still growing. It’s self-sufficient in water, oil, food. It’s an extraordinarily badly managed you know entity. But the extraordinary part hasn’t changed. I’m somewhat of an optimist and I think this whole process will be a cleansing process.
  13. Oil: It’s not so much prices as it is specific opportunities. What makes the opportunity is the distress of the situation.
  14. Natural Gas: I’m probably more focused on gas than oil. And it’s, you know, it’s a little bit like real estate. I mean we made a fortune because we bought real estate at a discount to replacement cost. Well we’re buying gas in the ground, gas that’s been drilled. People have spent $10 million a well, we’re buying wells at dramatically less than that. So it’s the same kind of creating a competitive advantage by virtue of your entry price.
  15. Real Estate: It’s very hard not to be a seller. And so we’re in effect fulfilling in some respects our longer term strategy in AQR where we’re liquidating the remaining garden apartments we have.  I’m not a big fan of buying at these cap rates.
  16. Blackstone: Blackstone is just buying brick and mortar. And they’ve been able to raise staggering amounts of money. And they’ve got to put that money to work. That’s something we’ve never wanted to be in a position of having so much capital that it affects our decision-making on an ongoing basis.
  17. Currencies: I’m very concerned about what’s happening in currencies. I think that you know Bretton Woods in 1948 was the allies coming together and saying we can’t recover in the world without growing free trade. We can’t create growing free trade without stable currencies. So let’s make sure we have stable currencies. That worked for a long time. Now we have very unstable currencies. World trade is slowing.
  18. Dodd-Frank: I’ve never known of a single situation in my life where reduction in liquidity was a plus. And effectively Dodd-Frank has dramatically reduced liquidity and that’s a big negative. And that’s something we haven’t dealt with yet.
  19. Politics: The American people are extraordinarily angry. The American people are extraordinarily depressed. The last time we had anything like this in my opinion was 1979. [To a statement regarding Trump’s popularity Zell responded]:  It’s because you guys are sitting here in New York City and you’re not in Des Moines. And you’re not in Boulder and you’re not all over the country. And you’re not seeing the enormous disparity that has existed between you know the coasts and the rest of the country. We have a lot of very unhappy people and I think this election is reflecting it. And I think it will be very dangerous.
  20. Flat Tax: I think if I were given a straight choice I would be in favor of a simple flat tax.
  21. Government Bonds: I’m not a big lender of money to governments period.
  22. Climate Change: The level of certainty of exactly what is happening has a lack of humility and arrogance to it that scares me. As far as I’m concerned, conventional wisdom is my greatest enemy. And this strikes me as an awful lot of conventional wisdom.

It was a fascinating 2-hour interview. I stripped off the intro, the rest appears below. It’s well worth a read.

For the full transcript go here.