Category Archives: Investing

WhyHotel adds Cathy Ross to board, expands in D.C.

Symbiotic alternative lodging service WhyHotel added Exclusive Resorts CEO Cathy Ross to its board and is launching a new, 95-unit pilot site in Washington, D.C.’s NoMa area.

WhyHotel is still in its fledgling stages building up proof of concept. Recently, the young company received $3.94 million in seed funding which has allowed the it to set up new pop-up locations and build out its leadership team.

Ross has 35 years of experience in consumer-facing companies, most of which have been in the hospitality space. Her expertise will help the young company as it continues to expand into new markets. 

“I am excited to bring my background in real estate development, asset management, finance, manufacturing and hospitality, to the WhyHotel brand. They have a fascinating concept that is a win-win for both the real estate developer and end user,” she said in a statement.

The D.C. location will set up shop inside of 95 units at Equity Residential’s newly completed luxury property, 100K Street NE, and will stay there through spring 2019.

“100K Apartments affords guests an elegant living environment in a hip neighborhood,” says WhyHotel President and Co-founder Bao Vuong said in a statement.

“We are thrilled to be offering our hotel-like amenities to Washington, D.C.’s vibrant NoMa neighborhood. The location offers great proximity to food venues, entertainment, art installations and new amenities delivering every day,” he said. 

WhyHotel alleviates some of the pressure of lease-up by using vacant units as luxury hotel rooms for a limited time. A boon for Class-A urban core properties which can experience some difficulty with lease up since competition in these areas is fierce.

“We believe welcoming WhyHotel to our 100K Street will offer people visiting the NoMa neighborhood the chance to experience our newly completed luxury community while providing a unique amenity that our residents and potential residents can also enjoy and at the same time create incremental value as we lease up this terrific property,” Equity Residential Vice President Development Benjamin Stoll said in a statment.

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Roofstock acquires single-family rental management platform

Tech 100 winner Roofstock, an online single-family rental marketplace, just acquired Streetlane Homes, a single-family rental management company, to open up new opportunities for managing SFR properties on behalf of institutional investors.

“We are excited to welcome the Streetlane team into the Roofstock family,” Roofstock CEO and Co-Founder Gary Beasley said in a statement.

“The combined capabilities of Streetlane and Roofstock create a compelling one-stop-shop for institutional investors who are looking for U.S. housing exposure but don’t have – or want to build – an operating infrastructure to acquire, renovate and manage a large portfolio of SFR properties,” he added.

Streetlane currently manages roughly 2,100 SFR properties across five markets: Atlanta, Chicago, Dallas, Las Vegas and Nashville. Roofstock will retain these contracts, and the two companies will combine their efforts to enhance Streetlane’s offerings, they explained.

Streetlane is capable of opening up an operation in a new market within 30 days to 45 days, and Roofstock plans to leverage this flexibility to expand Streetlane’s operations into new cities and service more institutional investors, Roofstock explained in a press release. 

The acquisition will bolster Roofstock’s existing partnerships with more than 40 certified local property managers across the nation who are already managing properties on behalf of Roofstock’s investor clients, the company said. 


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Court of Appeals declares FHFA structure unconstitutional

For the third time in recent memory, a government agency borne out of the housing crisis has been declared unconstitutional by a federal court.

The first two times it was the Consumer Financial Protection Bureau. But now, it’s the Federal Housing Finance Agency that has been found to be operating in violation of the Constitution.

The Court of Appeals for the Fifth Circuit ruled this week that the federal government’s regulator of Fannie Mae and Freddie Mac is not constitutionally structured.

Much like the earlier rulings involving the CFPB, the FHFA ruling deals with the agency’s leadership structure and whether a single director that wields as much authority as the CFPB director or the FHFA director is a violation of the Constitution’s separation of powers.

The CFPB was initially ruled unconstitutional in a majority opinion authored by Supreme Court Justice nominee Brett Kavanaugh. That initial ruling was later overturned by the full Court of Appeals, which ruled the CFPB’s structure to be constitutional.

But the CFPB wasn’t out of the woods. Just last month, District Judge Loretta Preska of the New York Southern District declared the CFPB unconstitutional, citing Kavanaugh’s ruling repeatedly.

Kavanaugh’s ruling in the CFPB case, which stemmed from a lawsuit from PHH Corp., comes into play frequently in the FHFA ruling.

In a majority ruling, the Court of Appeals for the Fifth Circuit rules that the CFPB is unconstitutionally structured.

The ruling comes as the result of a lawsuit brought by Fannie and Freddie shareholders who challenged both the structure of the FHFA and the so-called “Third Amendment Sweep.”

Over the years, many observers have questioned whether it was necessary for the federal government to modify its conservatorship agreement with Fannie and Freddie to sweep all the profits from the government-sponsored enterprises into the government’s coffers, an arrangement referred to as the “Third Amendment Sweep” or the “Net Worth Sweep.”

At the time, the government claimed that the GSEs were on the brink of collapse, and amended the terms of the GSEs’ conservatorship to ensure that the government had enough money to bail them out again if necessary.

In the aftermath, a series of Fannie and Freddie shareholders sued the government, claiming the “Third Amendment sweep” was not only unnecessary but illegal as well.

The Preferred Stock Purchase Agreements were modified late last year to allow Fannie and Freddie to hold some capital to “cover other fluctuations in income in the normal course of each Enterprise’s business,” but the lawsuits were still making their way through the courts.

In this case, Patrick Collins, Marcus Liotta, and William Hitchcock, referred to as Fannie and Freddie shareholders, challenged the FHFA’s structure and the “Net Worth Sweep.”

The Court of Appeals held that the FHFA was not constitutionally structured but ruled that the agency was within its statutory authority when it enacted the net worth sweep.

As for the net worth sweep, the court cited several other previous rulings in other courts as background for a similar decision to uphold the sweep.

“The Shareholders’ statutory claims mirror the claims made against the FHFA that the D.C., Sixth, and Seventh Circuits have all rejected. We reject the Shareholders’ statutory claims based on the same well-reasoned basis common to those courts’ opinions,” the Court of Appeals ruling states.

On the other hand, the Court of Appeals ruled that the shareholders were correct when they claimed that the FHFA is unconstitutionally structured.

“We hold that Congress insulated the FHFA to the point where the Executive Branch cannot control the FHFA or hold it accountable,” the ruling reads. “We reach this conclusion after assessing the combined effect of the: (1) for-cause removal restriction; (2) single-Director leadership structure; (3) lack of a bipartisan leadership composition requirement; (4) funding stream outside the normal appropriations process; and (5) Federal Housing Finance Oversight Board’s purely advisory oversight role.”

Much like the previous CFPB rulings, the FHFA ruling address whether the president has the authority to remove the agency’s director at will or for cause only.

Currently, the FHFA director is removable only for cause, a condition that is in violation of the Constitution’s separation of powers, the court ruled.

From the court’s ruling:

Congress encased the FHFA in so many layers of insulation—by limiting the President’s power to remove and replace the FHFA’s leadership, exempting the Agency’s funding from the normal appropriations process, and establishing no formal mechanism for the Executive Branch to control the Agency’s activities—that the end “result is a[n] [Agency] that is not accountable to the President.” The President has been “stripped of the power [the Supreme Court’s] precedents have preserved, and his ability to execute the laws—by holding his subordinates accountable for their conduct—[has been] impaired.” In sum, while Congress may create an independent agency as a necessary and proper means to implement its enumerated powers, Congress may not insulate that agency from meaningful Executive Branch oversight.

Therefore, the Court of Appeals rules that the FHFA director should be removable at will, but leaves the remainder of the FHFA’s previous actions, including the Third Amendment Sweep, intact. Thus, in the eyes of the court, the FHFA “survives as a properly supervised executive agency.”

The FHFA said that it will not be commenting on the court’s ruling.

To read the court’s decision in full, click here.

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