The commercial Dungeness crab season has been cut short for most of California for a fifth successive year in an effort to reduce potentially fatal whale entanglements in fishing gear.
State Fish and Wildlife Director Chuck Bonham announced Thursday that all crab pots and vertical lines must be removed from the ocean south of Point Arena by April 15 — 2½ months before the commercial season’s traditional June 30 close. The season also started six weeks late, with crews allowed to put only 50% of their gear in the water at first.
Though not entirely a surprise, the early finish comes as a significant blow to a struggling fleet that has yet to make up for the repeated loss of its lucrative Thanksgiving and Christmas markets in the beginning of the season.
And with the salmon season canceled this year because of a collapse in king salmon stocks, the inability of commercial crews to harvest crab for a longer period this spring may mean some fishermen and women decide to pack it in.
“It’s a business,” said veteran Bodega Bay fisherman Tal Roseberry. “Most people get into it because they love it. But if it doesn’t operate in the black, and you’re not able to feed your family, put a roof over your head, you have to start looking at something else. Loving it doesn’t pay the bills.”
This year’s early close also comes as state, federal and nongovernmental conservation agencies are putting increased funding and support behind whale-safe “ropeless” or “pop-up” gear in development over recent years to allow for crabbers to extend their efforts during the shoulder seasons, even when the giant marine mammals are present.
Instead of fixed gear, with a crab trap on the ocean floor connected to a floating buoy by a long vertical line, the experimental style keeps all the gear together on the sea floor until it’s triggered by a timer, acoustic signal or some other mechanism, releasing the buoy that then rises to the top.
Many commercial crabbers have been dismissive of the idea, convinced it can’t meet their needs and concerned that costs for the new equipment will put it out of reach. They say failure rates are high, and the fact that surface buoys don’t mark their location is an invitation for different crews to get their crab pots piled up.
The next thing you know, “we’ve created a whale gill net,” said veteran Bodega Bay fisherman Tony Anello.
There’s been some reluctance on the part of commercial captains to apply for the state permits required to experiment, even though it would allow them to continue catching crab into June.
“The ropeless gear is a non-starter, as far as we’re concerned,” said Crescent City crabber Ben Platt, president of the California Coast Crab Association, which represents about 140 commercial Dungeness crab permit holders in California, including about two dozen in Bodega Bay.
“We’re trying to keep ourselves alive, and we want to spare the wildlife, too,” said Dick Ogg, vice president of the Bodega Bay Fisherman’s Marketing Association. “There’s a lot of tension around pop-up gear.”
Members of the state Department of Fish and Wildlife and conservation groups are bullish about the new traps, however, with several manufacturers working on or ready to test equipment.
Ryan Bartling, a senior environmental scientist with the state, said it may that only a segment of the fleet decides to use it in the end, but it would allow for crabbing during more of the traditional Nov. 15 to June 30 season.
“I think it’s within reach,” he said. “What the timeline looks like, I’m a little uncertain. But the technology is there. It’s just making it all work together.”
Geoff Shester, senior scientist and California campaign director for Oceana, said he has worked with crabbers who have tried some types of gear during its development and seen it function well in the ocean, but says they need to test it, find the strengths and weaknesses so they can be addressed.
“It’s not going to happen overnight,” he said. “It’s going to take some trial and error.”
He said the whole effort is intended to allow crabbers to spend more time on the ocean without harming wildlife or violating rules, but it only works if the fleet participates.
“We’re trying to do this in a way that’s really going to work,” Shester said. “We want them to stay employed.”
Dungeness crab and chinook salmon have long been the mainstays of the North Coast’s fisheries, even as salmon populations declined over recent decades along with their freshwater spawning habitat.
But the region’s crab fishery has been in tumult for most of the past decade, first because of a protracted marine heat wave that spurred a toxic algae bloom, delaying the 2015-16 season start by more than four months.
Donald Trump may be the first former U.S. president to be indicted in a criminal case, but he’s far from the first big real estate player to get caught up with law enforcement authorities.
Trump was indicted Thursday for allegedly falsifying business records to cover up a hush-money payment to porn star Stormy Daniels.
A number of other prominent real estate developers have faced charges including bank fraud, tax evasion and witness tampering — and more than one received pardons from the former president who built his fame in their industry, while yet another received a pardon from Trump’s predecessor in the White House, Barack Obama.
Here’s a closer look at who they are, and what happened, in the cases involving well-known real estate players in the nation’s biggest cities.
In 2004, multifamily developer and landlord Charles Kushner pleaded guilty to 18 counts, including making illegal campaign contributions, falsifying tax returns and witness tampering. He was sentenced to two years in prison and served 14 months, getting released in 2006.
In 2020, Kushner, whose son Jared is Trump’s son-in-law, received a presidential pardon from Trump.
Boutique hotel pioneer Ian Schrager was convicted of tax evasion in 1980. The property at issue was Studio 54, the famed Midtown nightclub he co-founded. He served 20 months in prison.
Schrager received a pardon from a different source — President Obama — in the final days of his term in 2017.
Though family ties put Kushner in Trump’s orbit, he’s not the only real estate player the former president pardoned.
In 1996, a federal sting operation convicted Manhattan retail titan Alex Adjmi of laundering $22.5 million for a Colombian drug cartel through a Connecticut brokerage that turned out to be an undercover operation by the FBI and the Drug Enforcement Agency.
The head of A&H Acquisitions served nearly four years in prison. Released in 2000, Adjmi received a pardon from Trump in 2021.
While juggling several prominent development projects, New York real estate broker-turned-developer Michael Shvo was hit with charges in 2016 for allegedly scheming to evade payment of more than $1.4 million in taxes related to the purchase of fine art, furniture, jewelry and a Ferrari.
Shvo pleaded guilty to the criminal tax fraud charges and settled the case for $3.5 million, avoiding any time behind bars, after a 19-month saga that sidelined him from a number of notable projects.
Chicago real estate developer Larry Freed went from serving as head of one of the largest privately owned shopping center development firms to serving more than two years in federal prison on fraud charges.
His firm, Joseph Freed and Associates, had obtained a $105 million line of credit for city and suburban developments based on collateral previously pledged to another bank, prosecutors said in 2016. Freed’s three-year sentence was reduced to probation in 2020.
One of the largest private real estate owners in Boca Raton, Investments Limited founder James Batmasian pleaded guilty in 2008 to evading $250,000 in payroll taxes. He served an eight-month prison sentence.
Batmasian also received a presidential pardon from Trump in 2020.
Former L.A. city councilman José Huizar pleaded guilty in January to operating a pay-to-play scheme to give special treatment to developers who funded and facilitated bribes and other unlawful financial benefits.
The politician’s seat on the Planning and Land Use Management Committee gave him purview over major commercial and residential developments. His plea came after two developers, David Lee’s 940 Hill and Chinese real estate firm Shen Zhen New World I LLC, were found guilty of bribing Huizar for help.
Huizar faces a sentence of up to 26 years in prison, though federal prosecutors recommended he be sentenced to no more than 13.
LVGEM (China) Real Estate Investment (HKG:95) Full Year 2022 Results
Key Financial Results
- Revenue: CN¥2.34b (down 47% from FY 2021).
- Net loss: CN¥730.1m (down by 163% from CN¥1.15b profit in FY 2021).
- CN¥0.14 loss per share (down from CN¥0.23 profit in FY 2021).
All figures shown in the chart above are for the trailing 12 month (TTM) period
LVGEM (China) Real Estate Investment EPS Beats Expectations, Revenues Fall Short
Revenue missed analyst estimates by 40%. Earnings per share (EPS) exceeded analyst estimates by 43%.
The company’s shares are up 6.5% from a week ago.
Be aware that LVGEM (China) Real Estate Investment is showing 2 warning signs in our investment analysis that you should know about…
Valuation is complex, but we’re helping make it simple.
Find out whether LVGEM (China) Real Estate Investment is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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It’s been almost three weeks since Silicon Valley Bank (SVB) blew up. With both NY Signature Bank (SBNY) and Credit Suisse (CS) following right behind it.
Now, I recently touched on SVB and the chronic issues plaguing U.S. banks.
But there’s one issue that’s really worrying. . .
And that’s the ticking time bomb in the commercial real estate market – which is especially dangerous for smaller banks.
Because smaller banks – such as local and community banks – are sitting on a pile of toxic commercial real estate loans.
And I expect things are nearing a tipping point. . .
Let me explain.
Commercial Real Estate: Things Are Growing Very, Very Fragile
So, what is commercial real estate?
Putting it simply, commercial real estate (CRE) refers to properties used for business or investment purposes, rather than for personal residential use. Meaning office buildings, retail spaces, industrial properties, warehouses, multi-family (apartments), and other types of commercial properties.
Commercial real estate is typically purchased, leased, or developed with the purpose of generating income through rent or resale. Investors and businesses may also use commercial real estate for their own operations, such as leasing office space for employees or storing inventory in a warehouse, etc.
In other words, commercial real estate is essentially used for work-related business and thus drives income from such activities.
And this is a huge market.
For instance, the commercial real estate market is worth around $20 trillion.
And after decades of surging growth fueled by low-interest rates and easy credit, commercial real estate is now hitting a brick wall.
And I believe there are three main reasons for this commercial real estate stress:
I. Higher interest rates – which tend to decrease marginal demand for expansion by businesses (less space required), eat into landlord earnings, weigh down asset prices, and also increase the cost of debt.
This is a big problem for commercial real estate as it’s a highly leveraged sector (aka debt-dependent).
It’s estimated – according to the Kobeissi Letter – that over the next five years, more than $2.5 trillion in commercial real estate debt will mature.
Keep in mind this is far more than in any other five-year period in history.
Thus rolling over such a massive amount of debt has become much more expensive at a time when prices keep falling. And defaults are already beginning – such as Brookfield Asset Management and PIMCO failing to recently refinance.
II. Office space vacancies mount as businesses struggle to get workers to come back into the office.
For context, over 25% of U.S. employees still work remotely (up from 5.7% in 2018). And U.S. metro office space vacancies just hit 18.7% – which marks an all-time high.
This matters because if more individuals work from home, companies don’t need excess office space. So they’re canceling leases, or simply selling marginal properties.
And we’ve seen this over the last year as companies – from Meta and Intel to Chevron and Wells Fargo – downsize in big ways.
Breaking leases and selling commercial real estate will further eat away at rent margins and sink property prices (as supply overwhelms demand).
III. There was a glut of commercial real estate built over the last few years. And there’s still a ton coming online.
For perspective – as of February 2023 – there’s about 125 million square feet (M-sqft) of office space under construction. And another 271.3 M-sqft in the planning stages.
Making matters worse – according to CoStart – there’s currently 232 M-sqft of surplus commercial real estate up for subleasing. Which is twice the level from before 2020.
Now, I expect much of that planned construction won’t continue. But what’s already being built is a huge amount.
Thus – as I’ve written about before regarding the capital cycle – these builders are adding supply into a glut (typical in the late stage of the cycle).
This will weigh down building prices and rents further as the supply increases at a time when demand is already anemic.
So, it’s not hard to see that the commercial real estate market is growing increasingly fragile from both structural issues (debt and work-from-home) and cyclical downside (higher interest rates and overbuilding).
But the big question is, who’s most at risk of further downside?
Commercial Real Estate and Smaller Banks – An Unbalanced and Fragile Dance
I think it’s clear that the downside in commercial real estate outweighs any upside in the years ahead.
And while many focus on this aspect, I’d rather look at what negative ripple effects this will cause.
Hence why I’m looking at smaller banks. . .
Now, what do I mean by smaller banks?
The U.S. government describes small banks (or rather community banks) as having assets of less than $1.384 billion in either of the last two calendar years.
So – according to recent data – that’s about 3,725 banks in the U.S. (out of the roughly 4,200 total commercial banks)
And while these ‘community’ banks hold less than about 10% of total assets in the banking system (give or take) – they’re the lifeblood in smaller and rural markets.
So, what’s the issue here?
Well, these community banks are extremely exposed to the commercial real estate market.
To put this into context – according to Morgan Stanley – U.S. banks currently hold roughly 38% of all commercial real estate debt.
Meaning banks hold $1.8 trillion of the total $4.5 trillion debt.
And out of that, nearly 30% is held by small banks (compared to just 7% for large banks).
More worrisome is that the acceleration in commercial real estate loans by small banks has soared over the last decade. Rising from roughly $800 billion in 2012 to $2 trillion in mid-2022.
But most troubling is the sharp rise in the last two years. . .
And according to MSCI Real Assets, landlords received about 27% of financing from local and regional banks in 2022 – which was the biggest source of newly originated debt.
Other data – according to Goldman Sachs via FT – shows banks with less than $250 billion in assets make up about 80% of commercial real estate loans.
Thus it’s no stretch to say that the smaller banks are disproportionately leveraged in the commercial real estate market.
But here’s where the amplifying feedback loop comes in. . .
Since commercial real estate depends on a hefty amount of financing from smaller banks, these smaller banks also depend on commercial real estate prices and incomes.
When income streams from leases and property values rise, banks will make loans (as it’s profitable and secured by increasing property prices).
But when property prices (which back the loan) fall, and incomes erode (increasing default risk) – things sour.
Banks won’t extend new loans into the sector. And without new financing, these commercial real estate owners can’t roll over their debt. So they’ll sell, pushing down prices further as supply increases relative to anemic demand.
Thus reinforcing the feedback loop as banks suffer losses and tighten credit further. And on and on.
So, why does this matter now?
Because since early-2022, banks have started tightening credit standards in big ways. Especially in the commercial real estate market.
For instance – over the last year – the net percentage of domestic banks tightening credit standards for commercial real estate loans has soared to 70% in Q1-2023.
This is problematic as a tidal wave of commercial real estate debt comes due in the next few years – with $900 billion maturing by 2025.
And these owners need access to credit.
Without it, they’ll end up forced to default and liquidate.
This will also affect smaller bank balance sheets in a big way. Since they’re extremely entrenched in the commercial real estate sector.
For instance – after SVB collapsed in early March – it put a bright light on the massive losses facing loan books for commercial real estate debt.
When regulators sold off $72 billion from SVB, it went for a $16.4 billion discount from what they were “valued” at on their books.
That means they went for roughly 77 cents on the dollar (or a 23% discount).
Now, it’s important to say that not all of the assets sold off from SVB were commercial real estate related. Roughly just $3 billion of their $13 billion real estate loans were commercial real estate.
But this gives us a look at the potential issue banks are facing with unrealized losses (meaning the prices they’ll get if sold on the market).
Or – putting it another way – smaller banks are going to have to deal with some serious write-downs (i.e. the difference between what they think their worth vs. what the market will pay)
For perspective, Barclays expects office-building valuations to drop by 30% over the next few years.
This will put steep pressure on small-to-medium bank loan books – since they’ve extended most of the credit to this sector.
Making matters worse, small banks have seen deposits fly out the door after the SVB blowup.
Smaller banks saw deposits drop by a record amount – down $109 billion through March 15th. And over $200 billion by the 27th.
This marks a 1.5% year-over-year decline – which is the first annual drop since 1986.
And if these smaller banks suffer further deposit outflows, they may have to sell assets in a hurry (and at a discount).
It’s important to remember that banks are black boxes – aka something with internals that are usually hidden or mysterious to onlookers.
Even the best analysts don’t really know what bank loan books are truly worth.
But one thing seems clear, the commercial real estate sector is growing more and more fragile.
And with it, so are the smaller banks that extended credit to them.
The black swans are lurking.
A federal judge sided with commercial landlords Friday, ruling that a Covid-era protection for retail tenants is unconstitutional.
For owners whose tenants fell behind on rent during the pandemic, the decision offers a chance to recoup some of that lost money.
At issue was a city law passed two months into the pandemic that barred landlords from going after tenants’ personal assets to recover unpaid rent.
Elias Bochner, landlord to a Chelsea burger joint that went under during Covid, and other commercial property owners sued the city over the rule in 2020. He claimed it violated the U.S. Constitution’s Contract Clause, which bars governments from making laws that interfere with private contracts.
The city initially won a motion to dismiss that suit. Judge Ronnie Abrams ruled that case law gave “substantial deference” to policymakers working in the public interest, as was the case during the pandemic.
Landlords appealed and won a favorable ruling in October 2021. The court identified several “serious concerns” that the guaranty law was not a reasonable means to uphold public interest, as required by the Contract Clause, and sent the case back to Judge Abrams.
On the last day of March, Abrams ruled that the city did not produce enough evidence to show the guaranty law “is reasonably tailored to accomplish its legitimate policy goals.”
Different landlords filed a state lawsuit to challenge the city law, which was sponsored by City Council member Carlina Rivera of Manhattan, but lost on appeal.
For commercial landlords whose tenants fell behind on rent from March 2020 to June 2021 and whose leases held them personally liable for that debt, the ruling is a huge win. Those landlords may now be able to go after those tenants’ assets, said Sherwin Belkin of the law firm Belkin Burden Goldman.
The Real Estate Board of New York celebrated the decision as precedent-setting for commercial real estate.
“We applaud the Court’s thoughtful and meticulous review of the record and believe this litigation will have important precedential value,” said the group’s general counsel, Carl Hum.
CFPB: TILA does not preempt state laws on commercial financial disclosure | Orrick, Herrington & Sutcliffe LLP
On March 28, the CFPB issued a determination that state disclosure laws covering lending to businesses in California, New York, Utah, and Virginia are not preempted by TILA. The preemption determination confirms a preliminary determination issued by the Bureau in December, in which the agency concluded that the states’ statutes regulate commercial financing transactions and not consumer-purpose transactions (covered by InfoBytes here). The Bureau explained that a number of states have recently enacted laws requiring improved disclosure of information contained in commercial financing transactions, including loans to small businesses. A written request was sent to the Bureau requesting a preemption determination involving certain disclosure provisions in TILA. While Congress expressly granted the Bureau authority to evaluate whether any inconsistencies exist between certain TILA provisions and state laws and to make a preemption determination, the statute’s implementing regulations require the agency to request public comments before making a final determination. In making its preliminary determination last December, the Bureau concluded that the state and federal laws do not appear “contradictory” for preemption purposes, and that “differences between the New York and Federal disclosure requirements do not frustrate these purposes because lenders are not required to provide the New York disclosures to consumers seeking consumer credit.”
After considering public comments following the preliminary determination, the Bureau again concluded that “[s]tates have broad authority to establish their own protections for their residents, both within and outside the scope of [TILA].” In affirming that the states’ commercial financing disclosure laws do not conflict with TILA, the Bureau emphasized that “commercial financing transactions to businesses—and any disclosures associated with such transactions—are beyond the scope of TILA’s statutory purposes, which concern consumer credit.”
- Average cost of house rose slightly in March
- Effect of interest rate rises still to be felt
- Another rate rise still possible depending on inflation
The cost of purchasing a home looks to be back on the rise, at least for the time being, in an unwelcome change for those looking to buy a property.
The average cost of buying a home in Australia increased by 0.13 per cent in March with the median value currently $732,000.
House prices have been falling since the Reserve Bank began its campaign to bring inflation into line in May 2022, causing interest rates to rise for 10 consecutive months.
In response, Sydney’s house prices fell by 6.03 per cent in the past year to sit at an average $994,000, Melbourne’s saw a 5.79 per cent drop with the median home value now $789,000, according to the latest PropTrack Home Price Index.
However, March has seen a slight bounce in prices, with Sydney house prices rising by 0.27 per cent, Melbourne by 0.12 per cent, Perth by 0.24 per cent and Adelaide by 0.10 per cent.
Brisbane, Hobart and Darwin bucked the trend with prices falling by 0.06 per cent, 0.43 per cent and 0.10 per cent respectively.
As rate rises drive prices down by reducing the amount of money borrowers are able to get, demand is being driven upward by increasing immigration, higher rent prices and an uptick in wages growth.
A lower number of new listings has also buoyed values according to PropTrack.
With inflation rates still much higher than the RBA’s 2-3 per cent target and unemployment at relatively low levels, the bank may opt for another cash rate hike, but a pause is on the cards, according to PropTrack economist Eleanor Creagh.
“Concerns around inflation expectations remaining anchored and the Board’s commitment to overcoming the challenge of high inflation make a 25-basis point lift next week more likely than not. But it’s a close call and the end of interest rate rises is in sight, whether the Reserve Bank pause this month or next,” she said.
“If the RBA does lift the cash rate next week by 25bp, it will be the 11th consecutive hike, bringing the cash rate to 3.85%, its highest level since April 2012.
“This would likely be the point at which the RBA pauses its tightening cycle and assesses the impact of the tightening already delivered.”
However, prices could still take a dip in coming months as the full impact of the rate rises is felt by mortgage holders.
“In this tightening cycle, with so many borrowers having taken advantage of record low fixed rate mortgages throughout the Covid period yet to feel the full impact of rate rises, this is especially the case,” Ms Creagh said.
“As such, it is expected that consumer spending will slow sharply over the coming months as the lagged impact of rate rises already delivered takes effect.”
Multifamily construction activity in New York City has inched along at a low ebb since the 421a tax break expired last summer, with foundation filings for new apartment buildings stuck below where they were in the first three months of 2022, according to a new report from the Real Estate Board of New York.
March saw 24 new foundation filings for 792 apartments, up slightly from the 22 filings for 432 apartments in February. January’s numbers were similar to February’s, with 26 foundation filings for 576 apartments. By comparison, the number of fillings for new apartment buildings in January, February and March 2022 totalled 68, 56 and 120, respectively.
Foundation filings help illustrate whether projects are actually moving forward, the real estate trade group said, because developers often file them several months — or more than a year — after new building applications.
Very few large residential projects have filed foundation applications in the last few months, and March marked the fourth month in a row with fewer than five large building filings. Only three buildings with more than 100 apartments filed initial foundation applications in March, totalling 364 units. Those included one mixed-income project and two developments that will likely be condos, the report notes. Tishman Speyer filed plans for a 21-story condo tower at 110 East 16th Street last month, on a site that could allow up to 150 units, The Real Deal reported. That would be the first project with more than 100 units to apply for a foundation filing this year, according to REBNY.
So where are these new projects happening? Brooklyn overwhelmingly leads the pack, accounting for 46 percent of all multifamily foundation filings in the last 12 months. Queens accounts for 20 percent of apartment filings, followed by the Bronx at 19 percent, Manhattan at 11 percent, and Staten Island at 3 percent.
While 2023 has been off to a slower start than 2022, REBNY pointed out that last year was a mixed bag for foundation filings, with much larger projects rushing to get shovels in the ground in the first half of the year. The first six months of 2022 saw 440 filings for 31,750 apartments, while the latter half of the year saw 186 filings for 12,005 units.
Rebecca Baird-Remba can be reached at email@example.com.
UPDATED, March 31, 5:45 p.m.
Crescent Real Estate is planting a flag in South Florida, acquiring the Colonnade Hotel in Coral Gables for $63 million.
The Dallas-based real estate development and investment firm is the buyer of the property at 180 Aragon Avenue, according to three sources familiar with the transaction, including Crescent’s partner in the deal. The hotel operates under Marriott’s Autograph Collection brand.
Crescent paid roughly $401,000 per room. Its joint venture partner, Houston-based private equity firm Sage Street Equity Partners, confirmed the transaction on its website.
The seller, publicly-traded Pebblebrook Hotel Trust, disclosed the deal — without identifying the buyer — in a recent filing with the Securities and Exchange Commission.
Christopher Exler and Pamela Vasquez of JLL represented Pebblebrook.
Executives for Crescent, led by chairman John Goff, and Pebblebrook’s CFO Raymond Martz did not respond to requests for comment.
In 2014, Pebblebrook paid $43.1 million for the 157-room building when it operated as a Westin-branded hotel. Two years later, Pebblebrook spent $18 million renovating the Colonnade. In 2019, the property switched to the Autograph Collection banner.
Last year, the Colonnade had a net operating income of $4.1 million, and hotel earnings before interest, taxes and other deductions of $4.8 million, the SEC filing states.
Completed in 1926, the Colonnade was designed in the Beaux Arts style by architect Phineas Paist. The building was originally developed as a sales center for Coral Gables founder George Merrick’s development projects. In 1989, the property was converted into a hotel after going through several other uses between the 1930s and 1980s.
Pebblebrook, a Maryland-based real estate investment trust led by CEO John Bortz, owns 49 resorts and hotels with about 12,500 rooms in 14 markets, including Florida.
Crescent owns roughly $4.5 billion in offices, multifamily, hospitality and senior living properties, according to the firm’s website. Crescent is also developing projects worth a combined $500 million. The Colonnade is the firm’s second Florida property. It owns the Westshore Grand Hotel in Tampa.
In December, Crescent sold a Dallas office high-rise for $400 million. Also last year, the firm raised $265 million from private investors to be used as equity for new projects.
Other recent South Florida hotel deals include the $17 million acquisition of a Coral Springs Marriott-branded hotel by Michigan-based hoteliers Malik Abdulnoor and Sahir Malki Abdulnoor.
Last month, New York-based firms Blue Suede Hospitality and MCR paid $40 million for two South Beach hotels, and $118.3 million for a Miami Hilton-branded hotel, respectively.
Academic institutions receive lower financial returns from biotechnology licenses than commercial firms
Newswise — The financial terms of biotechnology licenses from academic institutions are significantly less favorable than those of comparable licenses between commercial firms according to a new study from Bentley University’s Center for Integration of Science and Industry. The study, published in the journal PLOS ONE, shows that the royalties and payments to academic institutions are significantly lower than those to commercial firms for similar licenses and products at the same stages of development.
The article, titled “Comparing the economic terms of biotechnology licenses from academic institutions with those between commercial firms,” is the first to make an explicit comparison of academic and commercial licenses. Licenses of biotechnologies from academic institutions provide a mechanism by which scientific discoveries made with government-funded research grants are transferred to companies to develop commercial products. These licenses provide financial returns to the public sector, which universities can use to support research or education, and enable industry to develop innovative products, create jobs, and generate economic growth.
“Our previous work has shown that the U.S. government invests more than a billion dollars for the early-stage basic or applied research underlying each innovative, first-in-class drug. Here, we examined how much of the profit from such products is returned to the public.” said Fred Ledley, Director of the Center for Integration of Science and Industry, and the senior author on this study. “The results suggest that the public sector is not getting the same returns that a company would expect from similar licenses.”
The Bentley University study compared the economic terms of 239 biotechnology licenses from academic institutions to biotechnology companies with 916 comparable licenses between commercial firms. Academic licenses had lower royalty rates (3% versus 8%), lower total payments (deal size) ($900 thousand versus $31 million), and lower payments before product launch (precommercial payments) ($1.1 million versus $25 million). While academic licenses, on average, involved products at less advanced stages of development than corporate licenses, differences in the stage of development accounted for less than half of the disparity between academic and corporate licenses. Considering differences in stage of development together with differences in research payments, co-development, co-commercialization, exclusivity, or grants of stock, academic licenses had royalty rates that were 3-3.6% lower than corporate licenses, deal sizes that were $11.4-$12.2 million lower than corporate licenses, and precommercial payments that were $7.6-$9.4 million lower than corporate licenses.
Prateet Shah was the lead author of this work along with Dr. Gregory Vaughan and Dr. Ledley. Mr. Shah conducted this research as an undergraduate researcher at Bentley University.
This analysis used the BioSciDB database provided by Mark Edwards and BioScience Advisors, now part of Evaluate Ltd.
This work was supported by a grant from the National Biomedical Research Foundation.
THE CENTER FOR INTEGRATION OF SCIENCE AND INDUSTRY at Bentley University focuses on advancing the translation of scientific discoveries to create public value. The Center is an environment for interdisciplinary scholarship spanning basic science, data analytics, business and public policy. For more information, visit www.bentley.edu/sciindustry and follow us on Twitter @sciindustry and LinkedIn.
BENTLEY UNIVERSITY is more than just one of the nation’s top business schools. It is a lifelong-learning community that creates successful leaders who make business a force for positive change. With a combination of business and the arts and sciences and a flexible, personalized approach to education, Bentley provides students with critical thinking and practical skills that prepare them to lead successful, rewarding careers. Founded in 1917, the university enrolls 4,100 undergraduate and 1,000 graduate and PhD students and is set on 163 acres in Waltham, Massachusetts, 10 miles west of Boston. For more information, visit bentley.edu. For more information, visit bentley.edu. Follow us on Twitter @BentleyU #BentleyUResearch.