West Coast Real Estate Update: Sept. 25, 2018
Title Insurance Firms Paying Close Attention to Latest Measure Imposing Russian Sanctions
The Defending American Security from Kremlin Aggression Act of 2018, a bipartisan bill introduced in the U.S. Senate last month, would force title insurance companies to report the identities of people using limited liability companies (LLCs) behind high-priced real estate transactions across the country. Under the proposed legislation, co-sponsored by Sens. Lindsey Graham (R-S.C.) and Bob Menendez (D-N.J.), Geographic Targeting Orders (GTO), a temporary program implemented by the Treasury Department's Financial Crimes Enforcement Network, would become a law applied nationally.
Currently, the GTO program applies to a dozen countries where title insurance companies must disclose beneficial owners of anonymous LLCs used to purchase real estate with cash. Those rules initially applied to transactions of more than $3 million in New York City and more than $1 million in Miami, and now apply in San Francisco, Los Angeles, San Antonio and Honolulu. The proposed law seeks to tamp down Russian interference in the midterm elections and impose sanctions on several Russian nationals. The title insurance rule was one of several anti-money laundering reform items included in the bill. The title insurance industry has bristled at the temporary nature of the GTO program and the added resources needed to conduct due diligence on anonymous LLCs. While the industry agrees that the core issue lies with the fact that LLCs can be operated anonymously, it also believes that beneficial ownership disclosure at the time an LLC is formed would remove the need for title insurance companies to find out what entity is behind a company.
Southern California Data Center Activity Increases in First Half of 2018
Southern California data center activity totaled 5.2 megawatts (MWs) in the first half of 2018, bringing the market total to 104.4 MWs. This total includes 16 MWs of inventory that has been added to the market since 2017. In general, data center activity is up across the country, with 177 MWs of total activity in the first half of the year, and it is set to break 2017 activity records. Demand from technology, entertainment and healthcare companies in the Southern California region is particularly strong.
CBRE First Vice President Kristina Metzger told GlobeSt.com, "There will always be a need for data center capacity in the Southern California market given the sheer size of the population, diverse economy and connectivity to the Asia Pacific Region." However, competition from other states has had an impact on demand. There are fewer large requirements in Southern California than other regions of the country, which benefit from lower power costs and taxes. "As such, the competition for large, one-off new acquisitions has risen and local operators have become increasingly competitive in their offerings. As several providers have some MWs of capacity available, we anticipate this trend to continue," observed Metzger.
Facebook Real Estate Binge Shows No Signs of Slowing
Facebook's plans to continue to grow are so ambitious that the company plans to redevelop whole swaths of the land it holds in the Silicon Valley city of Menlo Park. Its redevelopment could potentially double its workforce over the next decade to 35,000 people, more than Menlo Park's current population, reports National Real Estate Investor. Its newest office, a Frank Gehry-designed building called MPK 21, has 525,236 square feet of space, with angled corrugated metal roofed restaurants and an area filled with 20 massive redwoods and log benches, meant to make employees feel like they are in Muir Woods, the national monument north of San Francisco.
Aside from simply needing more space, Facebook's real estate deals are partly a response to the challenge of attracting the most in-demand workers in an area known for punishing commutes and soaring housing costs. The company is expanding its geography by pushing deeper into Silicon Valley to Sunnyvale, and entering San Francisco for the first time by fully leasing two brand-new towers. Decisions regarding its real estate needs came after intense data analyses. According to Margaret O'Mara, a professor at the University of Washington, Facebook's growth is part of a broader shift for how large tech companies are adapting their real estate. State-of-the-art headquarters used to be campuses where corporate cultures were built on physical proximity, but that is being replaced by a more dispersed model.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.