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Inside Real Estate (Nov 4th, 2017)

Reali, a flat-fee real estate company, has received an additional $3 million in its Series A funding round. The investment comes from Silicon Valley investor, Oren Zeev who will also join Reali's board as a new member. The funding round has raised $9 million for marketing and engineering efforts to expand beyond Reali’s current focus on Northern California. Reali launched one year ago offering flat fees for both buyers and sellers and is currently operational in San Francisco, Palo Alto, San Jose and Sacramento. The company reports that on average each transaction through Reali saved home buyers $28,550 off the cost of their home purchase. Reali’s app guides consumers through the buying and selling process. – HOUSING WIRE

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WeWork is opening a Bay Area headquarters at the new SalesForce tower. WeWork will lease three floors and plans to move 250 employees into the 61-story tower next year. Some of the space on the 36th, 37th, and 38th floors will also be available for use by WeWork members. WeWork has multiple locations in San Francisco, however, its main headquarters is in New York City. The tower has been nearly completely leased. – RECODE

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Westside Pavilion, a Los Angeles mall, is now up for sale. Macerich Co. is seeking a new owner for the three-story shopping center following the recent announcement that Macy’s will be departing its Westside Pavilion store in 2018. The mall had already lost its Nordstrom anchor store to Westfield Century City where Macy’s also has a store. The L.A. Business Journal reported that a $142 million loan associated with the mall went into special servicing in September and could go into default. Macerich owns multiple malls in Los Angeles County including Santa Monica Place. Tom O'Hern, Macerich's chief financial officer, stated on an earnings call that a mixed-use or non-retail project might be the highest and best use of the Westside Pavilion real estate.  – WALL STREET JOURNAL

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Wynn Resorts plans to spend up to $100 million on land surrounding its casino resort under construction in Everett, Massachusetts. CEO Steve Wynn stated that the purchases are not related to the development of his Wynn Boston Harbor project but instead were related to his overall desire to improve the neighborhood. The properties are both commercial and residential and Wynn Resorts has said it will work with the city of Everett on future plans. The $2.4 billion resort is scheduled for completion in 2019 and will feature a hotel, retail space, and 13 restaurants. – BOSTON HERALD

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Saudi Arabia’s Crown Prince Mohammed Bin Salman has announced plans for Neom, a $500 billion city of the future in the desert. The project on the edge of the Red Sea will eventually take over 10,000 square miles and will include high-rise towers and cutting-edge manufacturing and will be powered by renewable energy. The megacity is part of larger efforts to move the nation past a dependence on oil revenues. The Russian Direct Investment Fund has indicated it will participate in the project, bringing Russian companies into the mix for infrastructure and planning. The city is predicted to deliver $100 billion per year in GDP to Saudia Arabia each year by 2030.  – CITYLAB

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The announcement of the Tax Cuts and Jobs Act has sent ripples through the real estate industry with its plan to cut the mortgage interest deduction in half. The bill, H.R. 1, reduces the limit for claiming the deduction from $1 million to $500,000. The National Association of Realtors issued a statement expressing concerns. “Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that,” NAR President William Brown said.

Home buyers purchasing a primary residence who were in a contract before November 2 and are scheduled to close before January 1, 2018, will be exempt from the new rule. The new tax plan also changes the rules with regard to how sellers can deduct the profits from the sale of their primary residence from their taxes. Previously they needed to live in the house for two out of every five years and could deduct the gains once every two years. Now sellers must live in the home for five out of the past eight years and can only collect on the benefit once every five years. This would not apply to taxpayers with income over $250,000. 

The National Association of Home Builders also spoke out against the tax plan. Association CEO Jerry Howard said that the new legislation could potentially cause recessions in some of the biggest housing markets. Howard estimated that the changes could impact seven million homes in California where prices are often higher than many other areas. 

As Housing Wire reported, the tax plan could also impact the future of Fannie Mae and Freddie Mac. The reduction of the corporate tax rate could prompt the two government-sponsored enterprises to seek another government bailout if they are unable to meet their obligations. 

The news came as the real estate industry began to gather for the National Association of Realtors conference in Chicago. While only around five percent of mortgages are over $500,000, the bulk of those are in the Northeast and California. These are also markets where housing supply is strained and there is a concern that many owners might choose to stay in their homes rather than face an increase in their tax bills. 

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HOT PROPERTIES OF THE WEEK

Mike Myers has reduced the price on his penthouse in the Soho area of New York City to $13.95 million. Myers first listed the duplex at 72 Mercer Street for $16.95 million in 2015. He later added an additional unit for a total price of $21.5 million. The 4,204-square-foot unit has a private roof deck and high ceilings. The large living room has a fireplace and custom-designed bookshelves. Building amenities include a roof terrace with city views, a 24-hour concierge, private storage and a fitness studio. – CURBED NY

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Taylor Swift has picked up a four-story townhouse in the Tribeca area of New York City for $18 million. Swift purchased the 27-foot-wide building, which is next door to the building where she already owns a penthouse, in an off-market deal. The property last transacted in 2012 for $10.5 million. The townhouse is also the place where Dominique Strauss-Kahn, former head of the International Monetary Fund, stayed while under house arrest. Swift purchased her duplex penthouse from director Peter Jackson in 2014 in a pair of deals that totaled $19.95 million. She owns a variety of properties around the United States including a historic mansion in Rhode Island, the Goldwyn estate in Beverly Hills, and several properties in Tennessee. – NY POST

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A massive Palm Beach, Florida estate on South Ocean Boulevard is listed for $105 million. The owner Edward G. Watkins II and his wife Karen Watkins purchased the property in 2001 for $17.7 million. Watkins tore down the original home down and built a new seven-bedroom estate designed around a pool. The 28,400-square-foot waterfront residence could be one of the most expensive sales in the area. – THE REAL DEAL

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