A weekend topic starting with Bisnow London. "It is just over three years since Toys R Us tumbled into administration in the UK, and the property business that owned the UK stores collapsed into receivership. The portfolio carried debts of £363M and just £177M in assets. You would have to be an optimist to think there was a profit to be made here, but cometh the hour, cometh the man: UK investor Tim Knowles' Acepark Ltd took on the portfolio. Earlier this spring Acepark accounts confessed the outcome as the remaining stores fell in value faster than they could be sold."

"'It now looks unlikely that sufficient funds will be realised to make an overall profit for the group,' official accounts said. That golden sunrise ahead turned out to be an oncoming train."

"This is not an atypical story because the property industry has an optimism bias. Other examples are not hard to find: a consortium of investors completing Europe's largest ever property deal on the day Lehman collapsed in 2008; or the Chinese developer who built 700K SF of offices for Chinese companies in the docks of east London, only to find he built it and they didn't come (yet)."

"And in 2021 that bias could become a serious liability. 'I have no doubt that optimism bias will have played a part in the decision making regarding real estate during the pandemic and that it will have led to some unwise decisions being made,' psychologist Claire Beazley-Mungovan said."

"Property’s optimism problem is not that it is optimistic by nature or habit, but that it doesn’t know when to turn the optimism off. According to people with experiences as different as the industry’s wise old heads and psychologists, this makes the real estate business particularly vulnerable to expensive misjudgments."

"Wise heads agree that the risk of dangerous optimism is higher with younger property people who have yet to experience a serious boom-to-bust cycle, and for those who work in relatively new sectors that have only experienced growth, like the UK's purpose-built student housing business. Is this true?"

"Anthony Laville launched Birmingham-based Volume.Property in 2017. Today he is behind a 155-bed PBSA scheme in central Birmingham with another 107 beds starting on-site this year. In theory Lavelle ought to be a hard-core optimist, but turns out to be a textbook study in how to keep optimism under control."

"'At this stage in my business, I kind of have no choice but to be optimistic about PBSA,' Laville told Bisnow. 'And all the indicators for the sector are good, including our bookings for next year. I don’t think the sector is heading for a bust, but certainly some local PBSA markets have oversupply, and some operators will suffer.'"

"Laville does what optimists often find very hard: He seeks out evidence that unsettles the rosy view. 'I listen a lot, I ask a lot of questions, I look at other schemes and ask, do they actually have the bookings? Because I know exactly what it is like not to be able to let a property, and you have to protect yourself,' he said. 'I think for some operators and developers, the last few years have been a long winning streak, and I can see why they might get complacent.'"

The Huffington Post. "If your boss told you his mission was to 'elevate the world’s consciousness,' to join a revolution that would 'restore in each one of us a sense of dignity and community,' would you know you were working for a company that rents desk space?"

"That’s the story of Adam Neumann, the former CEO and founder of WeWork. The new Hulu documentary 'WeWork: Or the Making and Breaking of a $47 Billion Unicorn' charts his company’s dramatic rise from its founding as a co-working space in 2010 to its famous implosion and near-bankruptcy following a failed IPO in 2019, after which Neumann was forced out."

"At one point, WeWork was the largest private-sector office tenant in Manhattan, Washington, D.C., and London, with a valuation of, yes, $47 billion. So what went wrong?"

"It is clear in the film that there was a disconnect between Neumann’s ambitions and the reality of WeWork as a business. At one point, Neumann offers a 'community adjusted Ebitda' financial metric to hide WeWork’s unprofitability. But it is absolutely baffling to watch investors fall for Neumann’s pitch."

"Neumann raised billions from major investors like SoftBank, Benchmark Capital and JPMorganChase despite continued cash losses and unrealistic goals. Some of the reasons people gave for buying in: Neumann was tall, he had live charisma, he had extraordinary leadership and could successfully answer a riddle-like interview question."

"The film suggests Neumann was able to find so much success because he fit a certain white male leadership mold that made investors feel good, not because the financial data added up. He was the ideal culture fit, a concept that encourages people with power to favor 'who I personally like' and 'who reminds me of me' rather than who can actually do the job."

"This is most obvious in the tale of how Neumann convinced Masayoshi Son, CEO of SoftBank, to invest billions in WeWork. Son spent just 12 minutes at a would-be pitch meeting at WeWork, then invited Neumann to ride with him to his next meeting. Son reportedly said, 'I don’t need the pitch deck. Let’s just talk.' In the car, he asked, 'In a fight, who wins: the smart guy or the crazy guy?' Neumann answered, 'The crazy guy.'"

"Son told Neumann that he had answered correctly but needed to think in bigger terms. Son’s subsequent $4 billion investment put WeWork on track for even more breakneck growth, seemingly based on little more than the fact that Neumann confirmed Son’s biases of what leadership looks like."

The Review Journal in Nevada. "A few months before mobster Bugsy Siegel opened the Flamingo, a real estate firm took out an ad offering a big spread on Las Vegas’ new, sparsely filled resort corridor. Buyers could grab 140 acres a half-mile from the soon-to-open casino — for just $550 per acre."

"Of course, property values on the Strip are infinitely higher now, even when the 1946 offering is adjusted for inflation, as it amounts to a paltry $7,141 per acre. But in the past year, after the pandemic turned Las Vegas Boulevard into a ghost town for a while and sank the tourism industry, the fallout from the outbreak has, for the most part, not been kind to the roadway’s real estate market."

"In the most recent property swap, Rhode Island casino operator Bally’s Corp. announced Tuesday it is buying the Tropicana. As part of the deal, it will lease the land under the resort from the seller, Gaming and Leisure Properties, for an 'initial' term of 50 years at $10.5 million in annual rent. All told, Bally’s says the Tropicana buyout is valued at about $308 million. It’s a huge sum by any measure but still below the hotel-casino’s $360 million sales price in 2015."

"The recent deal follows a far more lucrative one announced last month. Investment firm Apollo Global Management and casino landlord Vici Properties reached a deal to purchase The Venetian, the Palazzo and the Sands Expo and Convention Center for about $6.25 billion from casino operator Las Vegas Sands Corp., which is exiting the Strip with the sale and focusing more on Asia."

"That deal, however, followed the February acquisition of the unfinished former Fontainebleau, a long-stalled product of the mid-2000s construction craze, through a process that lets people transfer ownership of financially distressed real estate while avoiding foreclosure. Not long before that skyscraper changed hands, a mortgage lender acquired around 27 acres of mostly vacant property along the north and south edges of the Strip through the same sort of process, known as a deed in lieu of foreclosure."

"And last summer, a bankruptcy judge approved plans for an investor to pick up nearly 20 acres across from Mandalay Bay, including the abandoned SkyVue observation-wheel project, with a $75 million credit bid. Creditors had worried about selling the spread during the early turmoil of the pandemic, though SkyVue had problems long before the coronavirus outbreak. With two giant concrete columns sticking out of the ground, the partially built project has blighted the boulevard for years."

"Selling vacant land on the Strip was no easy task even before the pandemic, given the high asking prices and the difficulty in financing a major resort project, though Las Vegas did have a string of blockbuster casino sales before the coronavirus outbreak. Still, the deals this past year should come as no surprise, given the pandemic’s swift and severe economic fallout."

"After Gov. Steve Sisolak ordered casinos and other businesses closed to help contain the virus’s spread, the Strip turned into a surreal site of barricaded resort entrances and empty sidewalks. At one point, one in every three people in the valley was out of work. Resorts and other businesses later reopened, and Las Vegas has seen a big influx of tourists lately. Still, visitor levels and gambling revenue plunged last year, and the valley’s unemployment rate, despite falling from its stratospheric highs, remains elevated."

"An estimated 9.3 percent of Las Vegas’ workforce was unemployed as of February, third-highest in the nation among large metro areas, federal data shows. Despite the recent surge of tourism, it’s anyone’s guess how long it will take for Las Vegas’ economy to fully recover from the pandemic. For now, let’s just hope the boulevard doesn’t again look like a scene from a post-apocalyptic movie. If it does, real estate values there will be the least of our problems."