Biden's War on RE & the Chanel-LVMH Space Race

Biden Makes Real Estate his Piñata

With consumer protection a core talking point on the campaign trail, the Biden administration is spanking the real estate industry on multiple fronts. First we had the DoJ’s antitrust investigation into the practices of ethically porous mega resi trade group NAR. Then there was the DoJ’s escalation of the RealPage rental price-fixing probe into a criminal investigation. And now, it’s title insurance that is under the cosh.

Government’s RE Piñata (cont.)

The Consumer Financial Protection Bureau, a top U.S. watchdog 🐕️ that functions as an independent agency, is discussing barring mortgage lenders from charging homebuyers for title insurance that protects the lenders. It’s part of an effort to better control home closing costs, which have an alphabet soup of fees associated with them. Median home-purchase loan costs, including title insurance, surged 22% to almost $6K in ‘22, per the CFPB.

“A title insurance policy for the lender protects the lender’s interest,” Maria Vullo, who formerly led the New York State Department of Financial Services, told Bloomberg. “I think it is a positive, pro-consumer, pro-homeowner policy to say that the lender has to pay for it themselves.” The measure, still in draft mode, would apply to both purchases and refis.

The CFPB said it was “working with agencies across the government to foster greater competition in the mortgage market and help Americans save money when purchasing or refinancing a home.” You can picture how far the mortgage industry’s collective stomach 🤒 probably dropped at the news. The measure, said Bob Broeksmit of the Mortgage Bankers Association, “reveals a fundamental misunderstanding of how the mortgage market works and a disturbing lack of awareness of existing regulations.”

Now, lenders are pretty good at figuring out how to pass costs on to the consumer, so we’ll see how this measure, if passed, manifests in other fees or increased premiums. The other thing to consider is whether this is indeed a long-term push for systemic change, or simply masala 🌶️ for election season. The vibes though, aren’t great: First American, which owns the largest title insurer in the country, saw its stock drop 7.5% so far Wednesday.

LVMH-Chanel Space Race

“A girl should be two things: classy and fabulous,” Coco Chanel famously said. Today, she’d probably tweak that to: “classy, fabulous and own her real estate on Fifth Avenue.”

After a nerve-racking pandemic fraught with loan modifications, lawsuits and foreclosure battles, landlords with primo space on Upper Fifth are enjoying a golden age as top luxury brands move to buy their properties. Jeff Sutton recently cashed in to the tune of $1.8B (blending at a WTF $6K/foot) with sales to Prada 👠 and Gucci 👛 parent Kering, and each deal in that supply-starved corridor makes the next one more intriguing. The latest: Chanel 🌸💨 and LVMH are both gunning to buy 745 Fifth Ave, per Bloomberg. German 🇩🇪 investment firm Wilhelm von Finck owns 99% of the property, while Albert Behler’s Paramount Group has a tiny piece and manages the building.
 
Chanel recently opened its standalone watch and jewelry flagship at the nearby Crown Building, whose retail portion is controlled by Brookfield, while LVMH finished a renovation of its Tiffany store at the corner of 57th St.

Why is this retailer rush to buy happening now? Per Eastdil dealmaker Will Silverman, who brokered Sutton’s deals, it’s a trifecta: a big spread between European corporate debt and what local RE players can get; an “upstairs-downstairs” luxe retail strategy that necessitates larger stores; and a zeroing in on super-prime locations at the expense of satellite ones. (More detail on this here.)

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Quickies

• Doomiest of office doom loops playing out in downtown St. Louis

• Blackstone looks to borrow $1B against its own investments to free up cash: the so-called NAV loan would be backed by bets from its $18B PE fund (‘16 vintage)

• Bank multifamily lending jumped >30% since end of ‘19, per Fitch

• Even nonprofits are sick of operating NYC rent-stabilized housing 

• Canary Wharf catches a break, with Morgan Stanley renewing its lease at the trophy but troubled London 🎩 office complex

• Cool illo of how loan mods surged in ‘23, and further support for the idea that the “Wall of Maturities” debate is nonsense

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