WeWork’s Adam Neumann, as portrayed by Jared Leto in the new Apple+ limited series “WeCrashed,” sprays the contents of a fire extinguisher around his largest investor, Softbank Chairman and CEO Masayoshi Son, on the rooftop of a Mexico City skyscraper.

The incident in the sixth episode comes shortly after the opening of a WeWork shared office site in the company’s 100th city, with Son finally telling Neumann that he was “crazy.” Neumann then unveils to Son a plan he’s formulated after nearly getting pushed out of his leadership position by increasingly skeptical investors, according to the dramatization. But stop reading now if you haven’t seen the newest installment.

The episode is called “Fortitude,” which is how Son describes Neumann’s courage in the face of adversity. In the dramatization, Neumann pitches Softbank on expanding its $4.4 billion investment to buy out WeWork’s other investors, including WeWork’s first backer, Benchmark Capital, in a proposed $20 billion deal that puts the value of WeWork at $47 billion. The deal, as Neumann pitches it to Son, has sticking points such as the co-founder retaining corporate control and preventing Softbank from investing in a WeWork rival. Son ultimately walks away from quadrupling Softbank’s stake in WeWork.

That leaves Neumann in this dramatization to deal with questions from other investors, such as why he had WeWork sign office leases in buildings he personally owned, why he told his real estate team to double the lease terms or up the lease rate to rapidly boost its footprint, or why he trademarked the word “We,” which he then let the company use for $5.9 million.

In watching Neumann’s wheeling and dealing, my real state broker watch pals, Thirty-Four Commercial’s Sarah Hinkley Kennington and Ruth Griggs, could only shake their heads, saying that this isn’t how office leases are done.

“It’s not uncommon for an investor and firm to own its real estate and then lease it, but to not have it disclosed properly is a bigger problem,” said Kennington, founder and partner of Dallas-based Thirty-Four Commercial.

Griggs, a senior vice president at the real estate services firm, added that “they were also negotiating at above-market deals, adding to it becoming a potential problem.”

Both Kennington and Griggs remember a time before WeWork had entered the Dallas market, when landlords chased after them hoping to bring what they considered to be a new concept to their doors. The two, who represent landlords in leasing office buildings, would go to New York City to visit WeWork locations and come back to Dallas in hopes of bringing the first WeWork to the city. WeWork finally opened its first location in Dallas in early 2017, at an office tower at 1920 McKinney Ave. in Uptown.

Kennington, who is leading the lease up of Uptown’s newest office tower, The Link at Uptown, said she had to turn away a “big scale” coworking provider at the beginning of the leasing process to initially make way for more creditworthy tenants before signing coworking tenants. The 25-story office tower is roughly 50% leased, with additional leases in the works, she said.

Kennington and her team must make sure those holding the equity behind a newly constructed office building are happy with the risk they are taking with each office tenant. Often that means new space goes to long-term creditworthy tenants such as law firms, real estate firms, and financial services firms. Coworking might come later, she said.

“Landlords are constantly assessing risk with rents so thin the breakeven point for a landlord is only after a few years,” Kennington told CoStar News.

For WeWork, the investment was always plenty of tenant improvement dollars — even if they signed at above market terms. In the “WeCrashed” episode, those favorable lease terms helped build a portfolio of 8.9 million square feet of leased office space in New York City, making WeWork the Big Apple’s largest landlord at the time. Kennington and Griggs said the statistic was “shocking,” but it likely didn’t warrant a party — or the subsequent hangover that led to Neumann being in tears at the end of the episode with a wife, played by Anne Hathaway, who couldn’t bring herself to comfort him.

Kennington and Griggs, both mothers as well as real estate executives, said they had never really heard about Neumann’s wife Rebekah’s pet project, “WeGrow,” which took root and became a school despite at least one investor in the episode telling Neumann there’s no money in running a school. Here are two lessons from this week’s episode:

• Stay in your lane. Once you leave your core competency, it often leads to demise, said Kennington. Griggs adds: “Especially if you are not profitable in that lane to begin with, you should focus on being profitable before you start to grow.”
• Relationships matter. Between mocking WeWork co-founder Miguel McKelvey to investors as an unsuitable candidate to run WeWork and telling Rebekah she did not help build WeWork, Neumann alienates those closest to him. In the episode, Neumann writes the word “We” on a glass of tequila, then empties it to turn it upside down into the word “Me.”

One of the nation’s most concentrated industrial neighborhoods is growing as developers scramble to assemble whatever land they can to meet demand for warehouse and logistics space.

Chicago developer CA Ventures is the latest to throw a proposal into Richmond, California’s construction pipeline with plans to overhaul a vacant waterfront property into a high-end industrial complex, according to a design review application filed with the East Bay city. The project would include demolishing the existing structure at 1411 Harbour Way S at the Port of Richmond and building an industrial complex with nearly 202,500 square feet of space.

The roughly 8-acre site is owned by the city of Richmond, according to public records and CoStar data. However, the city signed a 26-year lease agreement in 2020 for a portion of the port’s terminal with a joint venture group that included Orton Development, an Emeryville, California-based firm with a long track record of complex rehabilitation and redevelopment projects. As part of the lease deal, the city agreed to include up to about $10 million to restore what city officials described as a “degraded” property, which was built in the 1970s.

“This long-underutilized City of Richmond port property is perfectly positioned for distribution or manufacturing use and will contribute to the social and economic growth of the surrounding area through job creation and revenue generation,” CA Ventures Executive Vice President William Lu said in the statement. The developer did not provide additional details about the proposed plan or its potential timeline.

For Industrial Property, the Problem Isn’t Demand. It’s Supply.

It isn’t clear whether CA Ventures will team up with Orton or take over the project entirely. Orton did not respond to CoStar News’ requests for comment.

Though significant, the Richmond project will be a drop in the bucket alongside the city’s supply of more than 17.7 million square feet, according to CoStar data, an amount that makes it one of the most concentrated industrial markets in the country.

Throughout the East Bay — the Bay Area’s largest industrial market — a recent surge of developments has boosted the region’s stock at the fastest pace since the late 1990s, according to CoStar data. More than 2 million square feet of industrial space was completed in 2021, adding to the nearly 5 million square feet completed in 2020, the highest annual total since 1998.

Even with the additional supply, year-over-year rent growth has hovered around 7% for the past decade and is now settled at nearly 7.2%. What’s more, the average vacancy rate for industrial properties scattered across the East Bay stands at a little more than 4%, according to CoStar data, well below the 10-year historical average of 6.2% and down significantly from peaks of more than 12% reported at the height of the Great Recession.

A team of investors is expanding its stake in the Bay Area’s multifamily market with an acquisition and accelerated plans to address the region’s dearth of affordable housing options.

Integrity Housing and Ascenda Capital finalized a roughly $31.6 million deal to acquire the Lakes apartment property in Concord, California, one of the Bay Area’s largest cities and home to some of the steepest rent increases in the nation’s priciest housing market. The purchase equates to nearly $309,000 per unit for the East Bay property, according to Contra Costa County property records and Marcus & Millichap, which brokered the deal on behalf of the seller Ruder Family Investments.

Asking rents at the 102-unit complex have climbed by about 6% over the past year, according to CoStar data, and California investors Integrity Housing of Irvine and Ascenda Capital of Bervely Hills are taking the property in a different direction as part of a plan to create more affordable housing for Bay Area renters.

With the Lakes deal, the duo has since late February spent more than $145 million on a string of multifamily purchases. Its portfolio now includes four properties that total more than 400 units in the high-growth suburbs of San Leandro, Concord, Hayward and Belmont.

Affordable Housing Investor Scoops Up Pair of East Bay Multifamily Properties 

Integrity did not respond to CoStar News’ requests for comment. Ascenda Capital declined to provide details about its latest acquisition, but said of its previous three purchases that it was eager to grow its presence in the outer Bay Area, which it described as one of California’s strongest housing markets.

It has been only two years since Redwood City-based Ruder Family Investments acquired the property, at 1818-1850 Laguna St., for $26.8 million, or about $262,750 per unit, according to CoStar data. In the time since, Marcus & Millichap Senior Managing Director Levin Johnston said in an email, the trust made a number of substantial capital improvements, including modernizing units, installing high-end finishes as well as updating kitchens, exterior paint, deck enclosures and catwalk railings throughout the exteriors.

The upgrades, combined with rising demand for cheaper housing alternatives in the Bay Area, have pushed rents at the Concord property even higher. Asking rates are now nearly $1,950 per unit at the complex, according to CoStar data, substantially higher than in previous years but still shy of the neighborhood average of a little more than $2,000 per unit each month. What’s more, Concord remains a relatively affordable market compared to pricier, often smaller options in San Francisco, Silicon Valley or Marin County.

Average rents in San Francisco, the nation’s most expensive multifamily market, are more than $3,000 per month, according to CoStar data.

Johnson did not disclose the value of the improvements, and Ruder Family Investments did not immediately respond to CoStar News’ requests for comment.

The investors financed all four acquisitions through tax-exempt bonds issued by the California Municipal Finance Authority, which helps provide capital for economic development projects and social programs on behalf of a membership base that includes local governments and other public entities in the state.

The joint power authority greenlighted up to $40 million for Integrity and Ascenda’s purchase of the Lakes as well as any additional capital necessary to put toward renovations at the 1960s-era complex, according to state filings.

The joint venture was also approved to spend up to $155 million for its previous three purchases, of which about $114 million has been spent on acquisition costs, according to public documents and CoStar data.

With the Lakes purchase wrapped up, Integrity and Ascenda will begin rolling out a conversion that will ultimately transition all 102 units into designated affordable housing, according to filings with the state. A 75% share of the units at the joint venture’s previous three acquisitions will be converted to affordable housing, according to public documents.

A Los Angeles investor with a penchant for acquiring multifamily properties in fast-growing neighborhoods at a bargain is diving into a San Francisco Bay Area suburb with its latest $41.5 million purchase.

Benedict Canyon Equities closed on the 108-unit Hayden apartment complex in Martinez, California, according to Contra Costa County filings, where it plans to roll out its tried-and-true strategy of upgrading renovated properties to capitalize on rising rents. The deal with seller Pacific Urban Investors, a Silicon Valley firm, closed in late March.

The purchase price for the complex at 486 Morello Ave. shakes out to about $384,260 per unit, according to CoStar data. That’s below the roughly $401,500-per-unit average investors have paid for similar deals in the Martinez area, where rents have climbed by more than 5% over the past year as a result of rising demand and the neighborhood’s relative affordability compared to other Bay Area suburbs.

The typical renter in Martinez, about 30 miles northeast of Oakland, for example, pays an average $2,100 a month compared to the East Bay average of more than $2,350 per month.

For Benedict, the sale is the investor’s latest swing at targeting what it calls “undervalued opportunities” and repositioning them to capitalize on accelerating demand. The firm, which said in a statement that it has a multifamily portfolio valued at nearly $4 billion, said its sweet spot is acquisitions priced between $20 million and $45 million located in dense, urban neighborhoods and with plenty of room for improvements.

That strategy has played out well since the pandemic’s onset as renters have traded expensive city apartments for less expensive, more spacious alternatives in suburbs or secondary markets. What’s more, the population shifts since early 2020 are expected to continue as factors such as remote and hybrid work allow employees to live farther away from commercial hubs.

The multifamily market in Martinez hasn’t posted nearly the same levels of growth as other previously overshadowed markets such as Sacramento; Reno, Nevada; Tempe, Arizona; or Boulder, Colorado. However, proximity to the Bay Area Rapid Transit System, major thoroughfares connecting the neighborhood to nearby San Francisco or Silicon Valley, as well as dwindling supply has helped elevate its standing in the broader region’s multifamily market.

Investors have funneled more than $235.7 million over the past year into the city’s apartment market, according to CoStar data, exponentially higher than the roughly $36.5 million reported over the prior 12-month period.

The strengthening multifamily market has proven to be a boon for Pacific Urban Investors, which acquired the Hayden complex in November 2019, just months before the pandemic took hold. According to CoStar data, the Silicon Valley investor paid $30.3 million for the property, or about $280,560 per unit.

Neither Pacific Urban nor Benedict immediately responded to CoStar News’ requests for comment.