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Tag: Private equity management

  • Why the Fed expects more bank failures

    Why the Fed expects more bank failures

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    Of about 4,000 U.S. banks analyzed by the Klaros Group, 282 banks face stress from commercial real estate exposure and higher interest rates. The majority of those banks are categorized as small banks with less than $10 billion in assets. “Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, Klaros co-founder and partner at Klaros. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt.”

    14:18

    Wed, May 1 202410:05 AM EDT

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  • Looking for contrarian opportunities in China and US property: Gaw Capital

    Looking for contrarian opportunities in China and US property: Gaw Capital

    Gaw Capital's Goodwin Gaw discusses the company's strategy in Chinese and U.S. property markets.

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  • How RealPage influences rent prices across the U.S.

    How RealPage influences rent prices across the U.S.


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    RealPage software is used to set rental prices on 4.5 million housing units in the U.S. A series of lawsuits allege that a group of landlords are sharing sensitive data with RealPage, which then artificially inflates rents. The complaints surface as housing supply in the U.S. lags demand. Some of the defendant landlords report high occupancy within their buildings, alongside strong jobs growth in their operating regions and slow home construction.

    09:56

    Sat, Feb 3 20248:27 AM EST



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  • Why U.S. renters are taking corporate landlords to court

    Why U.S. renters are taking corporate landlords to court


    A group of renters in the U.S. say their landlords are using software to deliver inflated rent hikes.

    “We’ve been told as tenants by employees of Equity that the software takes empathy out of the equation. So they can charge whatever the software tells them to charge,” said Kevin Weller, a tenant at Portside Towers since 2021.

    Tenants say the management started to increase prices substantially after giving renters concessions during the Covid-19 pandemic.

    The 527-unit building is located roughly 20 minutes away from the World Trade Center, on the shoreline of Jersey City, New Jersey. A group of tenants at the tower is involved in a sprawling class-action lawsuit against RealPage and 34 co-defendant landlords. The U.S. Department of Justice filed a statement of interest in the case in December 2023, arguing that the complaints adequately allege violations of the Sherman Antitrust Act.

    In November 2023, the attorney general of Washington, D.C., filed a similar but more narrow complaint against RealPage and 14 landlords that collectively manage more than 50,000 apartment units in the District.

    “Effectively, RealPage is facilitating a housing cartel,” said Attorney General of the District of Columbia Brian Schwalb in an interview with CNBC. His office filed the complaint on antitrust grounds. They allege that landlords share competitively sensitive data through RealPage, which then sets artificially high rents on a key slice of the local rental market.

    Office of the Attorney General for the District of Columbia, November 2023

    “Rather than making independent decisions on what the market here in D.C. calls for in terms of filling vacant units, landlords are compelled, under the terms of their agreement with RealPage, to charge what RealPage tells them,” said Schwalb.

    RealPage says its revenue management products use anonymized, aggregated data to deliver pricing recommendations on roughly 4.5 million housing units in the U.S. The company says its tools can increase landlord revenues between 2% and 7%.

    “Just turning the system on will outperform your manual analyst. There’s almost no way it can’t,” said Jeffrey Roper, a former RealPage employee and inventor of YieldStar.

    YieldStar is one of three key revenue management tools offered by RealPage. The software balances prices, occupancy and lease lengths to help property managers optimize their portfolio’s yield. The company feeds data from its models into a newer tool dubbed “AIRM” that considers the effect of credit, marketing and leasing effectiveness.

    RealPage told CNBC that its landlord customers are under no obligation to take their price suggestions. The company also said it charges a fixed fee on each apartment unit managed with its software.

    RealPage was acquired by Miami-based private equity firm Thoma Bravo for $10.2 billion in 2021. In court filings, Thoma Bravo has claimed that it is not liable for the alleged acts of its subsidiary outlined by plaintiffs in the class-action complaints.

    Renters told CNBC they discovered how revenue management software is used in real estate after reading a 2022 ProPublica investigation. Equity Residential investor materials show that the company started to experiment with Lease Rent Options between 2005 and 2008. RealPage acquired the product in 2017.

    “How could we possibly know?” said Harry Gural, a tenant in an Equity Residential property located in the Van Ness neighborhood of Washington, D.C. Gural says he has been involved in legal matters against his landlord’s pricing practices for more than seven years.

    Affiliates of Equity Residential are contesting a separate decision made by a local housing authority in Jersey City regarding prices set on the Portside Towers property. The company has filed a lawsuit in federal court challenging the decision, stating that the decision could result in millions of dollars in refunds for tenants.

    Equity Residential and other defendant landlords declined to comment on ongoing RealPage litigation.

    Redfin reports that asking rents in the U.S. ticked down to $1,964 a month in December 2023, a decline from recent highs. Prices are coming down in markets such as Atlanta and Austin, Texas, where home construction is high. But analysts believe low rates of homebuilding on the U.S. East Coast could give well-located landlords more pricing power.

    “Guys like us that own 80,000 well-located apartments, we’re still in a pretty good spot,” said Equity Residential CEO Mark Parrell in a June 2023 interview with CNBC.

    Watch the     video above to learn about the rising tide of lawsuits against U.S. corporate landlords.

    CORRECTION: A previous version of this article misstated when Equity Residential purchased Portside Towers.



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  • East Coast mayors call for more office-to-apartment conversions

    East Coast mayors call for more office-to-apartment conversions

    Mayors in cities across the U.S. want to loosen rules that can slow the pace of office-to-residential conversions. In some instances, cities have offered generous tax abatements to developers who build new housing.

    “We have a great opportunity to change the uses in the downtown,” said Washington, DC, Mayor Muriel Bowser at a December 2022 news conference in support of her housing budget proposals.

    “It’s absolutely a budget gimmick” said Erica Williams, executive director at the DC Fiscal Policy Institute, referring to Bowser’s 2023 proposal to increase the downtown developer tax break. “We fully support the idea that some of these buildings could be turned into residential properties or into mixed-use properties, but that we don’t necessarily need to subsidize that.”

    In New York City, a task force of planners assembled by Mayor Eric Adams is studying the effects of zoning changes, and possible abatements for developers who include affordable units in conversions.

    Cities like Philadelphia have previously embraced these policies to revitalize their downtowns. In Philadelphia, homeowners and investors received more than $1 billion in tax breaks for their renovation projects.

    A small collective of developers have taken on this challenging slice of the real estate business. Since 2000, 498 buildings have been converted in the U.S., creating 49,390 new housing units through the final quarter of 2022, according to real estate services firm CBRE.

    Prominent investors Societe Generale and KKR have worked with developers like Philadelphia-based Post Brothers to finance institutional-scale office conversions in expensive central business districts.

    “Capital has gotten much more limited,” said Michael Pestronk, CEO of Post Brothers. “We’re able to get financing today. … It is a lot more expensive than it was a year ago.”

    Many experts believe local governments will alter zoning laws and building codes to make these conversions easier over the years.

    “Our rules are in the way, and we need to fix that,” said Dan Garodnick, director of New York City’s Department of City Planning.

    Watch the video above to learn how cities are getting developers to convert more offices into apartments.

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  • How the Federal Reserve affected 2022’s stock market

    How the Federal Reserve affected 2022’s stock market

    The Federal Reserve, over its more than centurylong existence, has emerged as a leading force in the stock market.

    This stature was bolstered by the central bank’s adoption of two unconventional policy tools in the 2000s – large-scale asset purchases and forward guidance.

    Large-scale asset purchases refer to the Fed’s emergency buying of government debt and mortgage-backed securities. Forward guidance refers to the central bank’s public communications about the future trajectory of monetary policies. The guidance often hints at the expected path of the federal funds interest rate target in advance of a policy change.

    Central bankers in 2022 repeatedly told the public to expect tighter economic conditions as it battles inflation. Economists believe this has contributed to months of declining prices across the S&P500.

    “I think they know they gambled and lost and that they have to do something serious in order to get inflation back under control” said Jeffrey Campbell, an economics professor at Notre Dame University and former Federal Reserve economist. “I fear that they took a gamble that inflation wasn’t too real at the beginning of 2021.”

    The Fed has reacted to hotter-than-expected inflation with seven interest rate hikes in 2022. These higher rates can weigh on publicly traded companies, particularly growth stocks in tech.

    Meanwhile, the Fed’s asset portfolio has decreased more than $336 billion since April 2022.  Experts tell CNBC that the full combined effects of this economic tightening are unknown.

    That has many people on Wall Street waiting for the central bank to pivot, and bring interest rates back down. At the same time, many financial advisors are calling for caution.

    “If you have somebody that has a thumb on the scale or has a decided advantage about what’s going to happen, whether we think good things or bad things are going to happen, it’s best not to fight that policy.” said Victoria Greene, founding partner and chief investment officer at G Squared Wealth Management.

    Nonetheless, many experts believe that central bank policy is only one piece of the puzzle. Both black swan events and investor sentiment play a massive role in shaping the trajectory of markets, too. “Sure don’t fight the Fed but … don’t believe too much that the Fed is all powerful,” said John Weinberg, policy advisor emeritus in the research department at the Federal Reserve Bank of Richmond.

    Watch the video above to learn how the Fed shaped 2022’s stock market.

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  • ESPN sells majority interest in iconic X Games brand

    ESPN sells majority interest in iconic X Games brand

    ESPN sold its majority stake in the X and Winter X Games on Wednesday, marking the end of a nearly three-decade chapter during which the network helped propel snowboarding, skateboarding and other action sports out of the fringe and into the mainstream.

    Terms of the sale to MSP Sports Capital, a sports-focused private equity firm that also has stakes in McLaren Racing and a handful of European soccer teams, were not released. ESPN will remain a minority partner in the events and will continue to televise them.

    This season’s Winter X Games are scheduled for Jan. 27-29 in Aspen, Colorado.

    Created during an era when ESPN still craved programming of all sorts (ESPN2 was originally designed specifically to appeal to a younger audience) the Winter X Games have long been a trendsetter in snowboarding. It carries a reputation for building the best halfpipes and slopestyle courses and finding new events (think, snowmobiling) and niches ( think, Knuckle Huck ) to keep action sports on the cutting edge.

    Next to his three Olympic titles, Shaun White’s 15 wins and 23 overall medals at the X and Winter X Games are his top sports achievement. Virtually all of the sport’s biggest names — Chloe Kim, Jamie Anderson, Danny Davis, Marc McMorris and more — have won multiple titles in Aspen. Even in an era in which the Olympics overshadows most everything, hardly anyone argues that a great snowboarder’s resume isn’t complete without some kind of victory in Aspen.

    The first X Games were held in 1995 — a summertime affair known as the “Extreme Games” that focused on skateboarding. Tony Hawk was among the gold medalists at the inaugural gathering. ESPN added a winter version in 1997 that eventually overshadowed its summer cousin in many ways, in large part thanks to snowboarding’s inclusion in the Olympic program a year later.

    Building courses, finding judges, dealing with athlete health and safety and scheduling concerts that, increasingly, became a major draw to the events takes a staff of more than 1,000. By selling the majority stake while remaining invested in the enterprise, ESPN will step away from that part of the endeavor but will still focus on its core mission — televising sports.

    “We’re proud of what we’ve created with our employees and the athletes over nearly 30 years of world-class X Games events and content,” said Jimmy Pitaro, chairman of ESPN and Sports Content.

    Stepping in will be MSP, which will take over the production of the contests, and is expected to reshape the digital offerings for an event that skews to a younger, content-craving audience.

    “Our vision for the X Games tomorrow, next year and a decade from now is simple — we want to create a global action sports community of athletes and fans where we push the limits of competition and entertainment,” said Steve Flisler, who becomes the new CEO of the X Games.

    Flisler has been an executive at Twitch, a streaming service that is best know for its live streaming of video games, and also was in leadership positions at NBCUniversal.

    He said the mission at the X Games is to create “a content engine that gives fans more ways to interact and get hooked to athlete stories.”

    “X Games athletes are competitors first but increasingly will become some of the most influential content creators across the globe,” Flisler said.

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    More AP sports: https://apnews.com/hub/apf-sports and https://twitter.com/AP—Sports

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