Written: November 22, 2017

National class action lawsuit filed in Atlanta against Equifax

A national class action lawsuit filed against Equifax Inc. (NYSE: EFX) claims that criminals have started using the information gleaned from July’s massive consumer data breach.

The Washington Post reports that a lawsuit, Allen et al v. Equifax, filed in Atlanta pulls together dozens of individual complaints from consumers in all 50 states plus Washington D.C., and “suggests that cybercriminals aren’t wasting time using the Social Security numbers, credit card accounts, driver’s license numbers and other sensitive personal information they siphoned out of the credit bureau’s reputedly secure databases on 145.5 million Americans,” writes columnist Kenneth R. Harney.

Harney reports that the suit intends to create a single giant class-action suit against the Atlanta-based credit reporting agency. Georgia resident Robert Huntis among the individuals reportedly apart of the lawsuit, claiming that multiple “unauthorized mortgages” have been applied for using his stolen information.

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National retailer claims top Atlanta broker ran massive fraud scheme

A lawsuit by the nation’s largest specialty bedding retailer claims a top Atlanta commercial real estate broker stuffed his mattress in a long-running fraud and bribery scheme.

Houston, Texas-based Mattress Firm Holding Corp. alleges prominent retail dealmaker Alexander Deitch was at the center of a “massive, multi-year fraud, bribery, and kickback scheme involving the senior management of a national retailing company.”

Mattress Firm is the nation’s top specialty bedding retailer with more than 3,400 company-operated and franchised stores across the country. At the time of the alleged scheme, Deitch was a senior vice president and principal at Colliers International Atlanta, one of the city’s largest commercial real estate brokerages. This year, Deitch was named No. 4 retail producer by the Atlanta Commercial Board of Realtors and is a lifetime member of its Million Dollar Club.

Deitch is no longer employed by Colliers.

The lawsuit filed Oct. 30 in the District Court of Harris County, Texas, claims Deitch worked alongside top Mattress Firm real estate executives Bruce Levyand Ryan Vinson (among the 17 defendants named in the case) to defraud the retailer out of potentially millions of dollars.

“Mr. Deitch denies the allegations made in the petition filed by Mattress Firm,” his attorney, Kevin Ward with Atlanta-based Schulten Ward Turner & Weiss LLP, said in a statement to Atlanta Business Chronicle. “All of his business dealings were conducted in good faith and in the best interests of Mattress Firm. He intends to defend the lawsuit in court.”

Among the allegations, the 47-page lawsuit claims Deitch inflated rents and elongated lease terms for Mattress Firm stores, thus earning higher commissions. He also allegedly set up shell companies including an entity called Chase Ventures LLC to clandestinely purchase properties that Mattress Firm was to lease, placing him “secretly on the opposite side of the transactions,” says the lawsuit.

Mattress Firm also accuses Deitch of charging bogus developer fees in excess of $50,000 per store. The lawsuit alleges he worked with a preferred group of developers who made “millions of dollars in profits” flipping Mattress Firm stores with above-market rents. Those developers in turn gave kickbacks to Deitch, and Mattress Firm’s Levy and Vinson in the form of “lucrative business opportunities and extravagant gifts,” says the lawsuit, such as free hotel stays, expensive dinners and exotic trips.

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Atlanta’s high-rise apartment market faces cooldown

After an unprecedented high-rise apartment boom, Atlanta is poised for a slowdown in new projects and a return to a renters’ market.

Several trends are merging to slow both construction and rent growth.

First, construction was started on 6,500 high-rise units in Buckhead and Midtown between 2015 an 2017, according to the Reid Report, a publication that tracks apartment development across the region. That is a historic level of apartment towers in the city’s development pipeline. Another 4,500 high-rise units remain under construction, according to real estate consulting firm Haddow & Co. It’s going to take some time for those apartments to fill up.

In fact, Atlanta didn’t have a high-rise rental market until this real estate cycle. Before that, almost all new residential towers were built as condominiums.

Another reason for the projected slowdown in apartment high-rises is the cost to develop them. Construction costs have soared more than 30 percent since 2010, when the first wave of projects started to form, according to market data.

And, now rents are struggling to keep pace with those costs. In fact, for some towers that opened between 2012-2015, effective rents are down as much as 10 percent, according to Haddow & Co.

Concessions are also being closely watched. In Buckhead, landlords are offering tenants up to two months of free rent if they will sign new leases, according to the Reid Report.

The fundamentals suggest next year Buckhead and Midtown may see the fewest number of new towers start construction since 2014.

“We are expecting a dramatic decline,” said Harvey Wadsworth, a development executive with Mill Creek Residential, which has a new high-rise under construction on Peachtree Road next to ritzy mixed-use development The Shops Buckhead Atlanta.

Apartment deliveries, or new units that come onto the market, is peaking in Midtown now and peaked in Buckhead two years ago, according to Mill Creek.

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It would have been difficult to keep up the pace. Consider that in 2015, Buckhead saw almost 3,000 new apartment units delivered to the market (the majority of those were high-rise). This year, deliveries are down 40 percent, says Mill Creek.

Midtown high-rise construction is peaking now. The neighborhood is expected to deliver 2,300 units in 2017, but could see that number fall to as few as 300 units in two years.

The spate of high-rise apartments over the past seven years was new for Atlanta. It was fueled by forces in the real estate industry that emerged in the wake of the Great Recession, including barriers to first-time home-buyers such as student debt, tighter mortgage requirements and a lack of affordable single-family housing supply.

Former Novare Group and Carter executive Conor McNally was in the middle of the condo boom more than a decade ago. McNally, who now is principal at Shelton McNally Real Estate Partners, isn’t buying the projected slowdown in new apartment towers quite yet, and he is joined by analysts such as Reis.

In its latest quarterly report, Reis observed, “The apartment market continues to withstand pressure from added supply. With so much construction underway, vacancy rates were thought to grow higher.”

But, “healthy job growth provided steady demand for apartments.”

McNally believes more companies moving into the urban core will continue to spur more apartment towers, but he also believes rents, at least for the moment, have peaked.

“Anyone with new towers under construction cannot reasonably expect the significant high-rise rent growth we’ve seen to continue, at least for now,” he said. “I think we are entering a period of rent stagnation.”

Asked whether Atlanta could see a renters’ market emerge, which is often marked by declining rents and bigger concessions, McNally said, “At least we are closer to one than we have been in the last several years.”

Ladson Haddow, vice president with Haddow & Co., said how the market shakes out comes down to supply and demand.

“Supply is outpacing demand, which is resulting in a competitive leasing environment,” Haddow said. “However, the urban core is experiencing superb job growth and is increasingly becoming a more desirable place to live. It is still too soon to determine how deep the demand pool is for the surge of high-rise units delivering to the market, but it does appear that we have generally reached a ceiling on how high rents can be pushed.”

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