
Some Amazon employees bought NYC condos before news of HQ2 location emerged - jakelazaroff
https://thehill.com/policy/technology/417633-amazon-employees-bought-new-york-city-condos-before-company-announced-hq2
======
carbocation
To understand whether this is even anomalous, you need to know:

\- How many Amazon employees already live in NYC or are already planned for
relocation there for non-HQ2 things.

\- The frequency at which a typical person around there buys new condos

Without knowing those, it's hard to have priors, or to begin to decide whether
this is a departure from those priors.

~~~
ProAm
They speak to this right in the article.

> but the Journal reports that one brokerage firm sold nearly 150 units just
> last week, 15 times its normal volume.

~~~
majormajor
That's the number in the week _after_ the announcement, by my reading.

> Amazon _announced last week_ that it would be splitting its second
> headquarters between Long Island City in Queens and Arlington County, Va.,
> ending months of jockeying between cities and speculation of where the tech
> giant would land.

> There are no exact numbers on how many units have gone into contract in the
> Long Island City area since the announcement, but the Journal reports that
> one brokerage firm sold nearly 150 units just last week, 15 times its normal
> volume.

------
sudovancity
"While employees of companies are barred from buying or selling stocks based
on information that has not yet been made public, lawyers told the Journal
that they were unaware of any such ban affecting real estate transactions."

This is exactly what I was wondering, I know there are rules against insider
trading, but I wasn't sure if there were rules against people buying property
based on a potential location for a new HQ.

~~~
gnopgnip
The crime of "insider trading" is a type of securities fraud. A plain reading
of the law would not seem to apply to purchasing a home. But historically
securities fraud has been used to prosecute a wide array of behavior

~~~
munk-a
I would be surprised if purchasing a mine for some particular mineral
immediately after learning that your tech company will suddenly need an
enormous amount of that mineral in a closed door meeting, didn't constitute
some sort of insider trading.

Similarly, if advanced real estate purposes were made with the intent of
resale I'd imagine you'd also get hit with insider trading. I think it'd be
pretty reasonable to prosecute them anyways since they are using insider
knowledge of market movements to gain an edge in the real estate market.

~~~
1123581321
That’s a very broad and speculative reading. Insider trading is about
regulating the securities market, not about keeping all transactions by the
insider information-balanced.

~~~
sfifs
Or as Matt Levine says - it is about theft (ie trading on stolen information)
not about fairness

------
mabbo
The locations really weren't generally known internally. A few days before the
announcement, there was a company-wide all-hands meeting with Jeff where we
presumed we'd find out. Nada. Nothin'. No details. We were all left in the
dark as much as anyone else.

So the real question here is "which employees, and what did they know?". Or
even better, will they be living in these condos for a few years, or selling
them in 3 months?

~~~
saiya-jin
Isn't in US some heavy taxation on capital gains from quick property sales to
prevent this type of speculation? Ie in France it's progressively lowering
after 5-6 years, it gets down to reasonable levels in I think 22 years.

The result is much less volatility on the market.

~~~
danielvf
There is a long-term capital gains tax break for holding a certain number of
years. However with real estate you can sell one property and use the money to
buy another within a certain amount of time and not have a taxable event. (See
[https://www.irs.gov/businesses/small-businesses-self-
employe...](https://www.irs.gov/businesses/small-businesses-self-
employed/like-kind-exchanges-real-estate-tax-tips) )

~~~
irq11
So it’s worse than having a policy that is neutral on flipping: our tax system
actually encourages it.

We shoud tax short term capital gains on property at 100 percent. Nobody
should be able to profit by driving up the cost of housing.

~~~
gowld
flipping houses isn't driving up the cost of housing. The costs go up for
other reasons. Flipping is simply trading, aka providing liquidity in exchange
for taking volatility risk.

~~~
dragonwriter
> flipping houses isn't driving up the cost of housing.

Yes it is.

> Flipping is simply trading,

Usually, not: flipping is typically short-timeline buy-improve-sell cycles
(that is, it's exploiting market irrationality where certain improvements add
more to market clearing price than they cost to add.)

This does bring up prices.

------
p0rkbelly
It says 2 employees bought a condo....in a neighborhood with probably the most
amount of construction in NYC. How is this scandalous? People do buy real
estate on their own...

~~~
p0rkbelly
I looked it up and it appears Amazon's current office in NYC is in Midtown --
meaning 2 employees of several thousand -- bought a condo in a neighborhood
just a couple of subway stops away. Probably because they couldn't afford to
live in Manhattan!

ARREST THEM! People shouldn't' be spending their paychecks on a home with a
decent commute to work.

~~~
TrainedMonkey
This is scandalous! I am certain we can find a few people in every major
company that would attest that this should be illegal.

------
mbesto
Matt Levine talks about what is considered insider trading and what isn't.
(scroll through each to the relevant headline)

[https://www.bloomberg.com/opinion/articles/2018-10-22/front-...](https://www.bloomberg.com/opinion/articles/2018-10-22/front-
running-amazon-with-buildings)

[https://www.bloomberg.com/opinion/articles/2018-11-20/u-s-
sa...](https://www.bloomberg.com/opinion/articles/2018-11-20/u-s-sanctions-
hit-european-banks)

[https://www.bloomberg.com/opinion/articles/2018-11-21/now-
yo...](https://www.bloomberg.com/opinion/articles/2018-11-21/now-you-can-
foreclose-on-your-neighbor)

~~~
savanaly
Most important tidbit in there is actually nothing to do with Amazon HQ2 but
rather his recapitulation of a subtlety of insider trading which most people
do not realize or necessarily share his perspective on:

>Insider trading, I often say, is not about fairness; it’s about theft. There
is no general prohibition on the use of material nonpublic information in
stock trading, and in fact investors are supposed to find out new facts, and
trade on them, so that prices can be more informative. Insider trading law is
really about the misappropriation of nonpublic information that belongs to
someone else — a corporate CEO using information that belongs to shareholders,
or a therapist using information that belongs to her client — rather than the
“level playing field” that prosecutors love to talk about.

~~~
matt4077
I think Matt Levine is rather excellent, a model for the sort of dialectic
reasoning that's sorely missing.

Yet I just don't get this argument of his. As far as I can tell, insider
trading prohibitions are intended to protect the integrity of the market.
That's why they are administered by the SEC. If you steal office supply, the
SEC doesn't get involved. If you steal trade secrets to build an exact replica
of <widget>, the SEC also has nothing to do with it.

"Integrity of the market" in this case means that every investor can at least
somewhat accurately estimate where they stand in the competition with other
investors. That doesn't mean it's a completely level playing field; Large
funds with the resources to send employees to every walmart and count the cars
in the parking lot will always have an advantage. And that's not a bug but a
feature, since it's the mechanism by which investors are rewarded for
uncovering information.

But those are what one might call "known unknowns". What could easily destroy
the market are "unknown unknowns, the Deus Ex Machina taking all your money,
with not even the theoretical chance to compete without leveraging insider
information yourself.

As an analogy, it's like a usual casino, where you know your expected value is
slightly negative. And one where, with no predictability, the staff sometimes
just takes all your chips and kicks you out.

All that appears to me rather close to the concept of "fairness". Not for any
moral considerations, but simply to avoid the inevitable death of an "unfair"
market.

(There's a fair (stolen?) chance that Matt Levine is right and I'm wrong. If
you are looking for investment or legal advice, he is far more capable than
me.)

(I also think this very case somewhat supports the view above: Surely buying
real estate ahead of the market is an opportunity that Amazon itself could
have used profitably. Thus, it would appear to fit the definition of "theft of
information that belongs to the company")

------
dawhizkid
What I'm curious about is whether LIC condo prices are really going to
increase dramatically compared to similar projects in other parts of NYC? LIC
is a major subway stop and well connected to the rest of NYC as is...you can
live in Manhattan and get to LIC in 1-9 stops in < 30m. You could even live in
Jersey City and get to LIC in 50m. It takes longer for some people living in
outer neighborhoods of SF to get downtown than that!

~~~
wgerard
I actually feel like what'll get much more expensive is Nassau county. LIC is
right off the LIRR, and commuting from LI -> LIC is very doable.

LIC is already basically full of luxury high-rises, so it's unclear to me that
it'll get significantly more expensive.

Of course, what the hell do I know about real estate.

------
liamcardenas
Stuff like this seems like standard practice in the real estate industry (I am
not an expert)

For instance, I know one strategy called "land entitlement"[1]:

Step 1) Find an area that has demand for a type of building or business that
it is not zoned for.

Step 2) Buy an option on a plot of land in that area.

Step 3) Lobby the government to rezone that area / approve your project

Step 4) Execute option and acquire land and a fraction of its new valuation

This isn't directly analogous to the what happened in this instance, but
essentially this is just a way for people with influence in local government
to make money. Imagine if someone with connections to the FDA bought an option
on a biotech stock and then convinced his friend, the commissioner, to help
get their drug through the approval process. I'm pretty sure that would be
illegal (or at least a gray area) -- but it's fair game in real estate.

[1] [https://cashflowconnections.com/land-entitlement-with-
chris-...](https://cashflowconnections.com/land-entitlement-with-chris-
tourtellotte/)

~~~
lifeisstillgood
i would not know where to begin with land options - is there a primer. it
sounds like a thing designed for people with corrupt control over local
councils

~~~
dmurray
The way I've heard this working is: you approach the landowner with a really
good bid for his land ($5m for his property worth $4m). He agrees to sell, but
you have trouble coming up with the money, and ask him if he can keep the
offer open for a year or so. He isn't thrilled with this, but you offer him
$250k up front, to be forfeited if you don't come up with the rest of the
money. This makes the $250k look more like a token of good faith and less like
an undervalued option, but it comes to the same thing.

------
siruncledrew
Generally curious: Is there such a thing as "insider trading" for real estate
purchases?

For example, what if Bezos were to buy a ton of real estate in the DC area
anticipating the value would go up after he announces Amazon will locate
there, and he could effectively position himself as a "slumlord" of sorts for
the surrounding real estate market?

~~~
siberianbear
Matt Levine [1] is a lawyer and he wrote [2] once that he doesn't think it's a
violation of insider trading laws to transact in real estate with insider
knowledge:

 _The insider trading laws apply only to securities markets — even insider
trading in commodities markets is mostly okay 2 — and that probably is because
of some background expectation of a level playing field in those markets.
Nobody expects real estate to be fair; it is not exchange-traded and liquid
and fungible; it is just obviously a market where some people know things that
others don’t. Insider trading in operation is about theft, not about fairness,
but the reason that the law concerns itself with the theft of one particular
kind of information — or, rather, with one particular misuse of other people’s
information — probably is about fairness._

[1]
[https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...](https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthew-
s-levine)

[2]
[https://www.bloomberg.com/opinion/articles/2018-10-22/front-...](https://www.bloomberg.com/opinion/articles/2018-10-22/front-
running-amazon-with-buildings)

Edit: I stand corrected, Matt Levine _is_ a lawyer.

~~~
zb
Matt Levine is actually a lawyer.

------
ufmace
I don't see anything about the timeline of these purchases, which seems like a
critical detail to me. Most NYC purchases are 1 month+ affairs, and it's not
unusual for it to stretch to 3 months or even longer. I'd like to know the
date they initiated a property search, went on-contract, and closed the sale.

If you wanted to be sure of closing before the official announcement, you'd
have to start your search more like 6 months ahead of time. I doubt even
Amazon itself was sure of the location that far in advance. Maybe they had
already decided to move there with no knowledge of the HQ2 location at all?

Or have they even closed on these properties? It's more plausible that they
could learn the information, start a search, and get a purchase contract
signed in a week or two if they were in a rush and not too picky. Then they
would be fairly well guaranteed to be able to complete the purchase at a pre-
announcement price. Assuming that the announcement does infact affect the
price - this isn't that huge of a corporate move for the NYC market. But that
also means that the purchases could fall through if there are legal questions
about it.

------
CodeSheikh
My personal observation why Amazon was always going to move to LIC (New York
City) and it has been decided if not years then months earlier: I live in NYC.
I have a very good friend who moved to LIC in March this year. You have to
understand that there is already abundance of construction going on in LIC for
past few years, but not at an aggressive rate. But within a radius of three
block where she lives (near FoodCellar market and Hayden something condos)
construction peaked. I can count there are 7-8 aggressive construction going
on this area alone. My understanding is clearly city leaked/shared this
information with builders months in advance so that they can get a head start
on these new condos. This area I am referring to is near One Court Sq (one of
the buildings shortlisted for potential Amazon HQ).

[https://commercialobserver.com/2018/11/amazon-finalizes-
plan...](https://commercialobserver.com/2018/11/amazon-finalizes-plans-
for-1m-square-feet-at-one-court-square-in-long-island-city/)

[https://www.google.com/maps/place/Citibank/@40.7472946,-73.9...](https://www.google.com/maps/place/Citibank/@40.7472946,-73.9443305,15z/data=!4m2!3m1!1s0x0:0xbc1def18984f1fc9?ved=2ahUKEwi949j5wObeAhUGIDQIHf2MC78Q_BIwCnoECAIQCA)

------
mancerayder
Who cares? There's no shortage of condos for sale! In case anyone is deeply
concerned about the moral implications (because there are 0 legal
implications), there's actually a luxury condo glut in NYC right now.
[https://therealdeal.com/2018/08/19/condo-glut-is-to-blame-
fo...](https://therealdeal.com/2018/08/19/condo-glut-is-to-blame-for-nycs-
weakened-luxury-market/)

------
HillaryBriss
> _The employees decided to buy units in a new 11-story condo building in the
> Long Island City neighborhood of Queens just before the first reports of
> Amazon’s HQ2 location were released this month..._

On the surface, these condo purchases seem suspicious. OTOH, there are
thousands and thousands of Amazon employees, so, one might ask: how many
condos in NYC do Amazon employees _typically_ purchase per month? Is that
number zero?

~~~
toomuchtodo
> On the surface, these condo purchases seem suspicious.

Buying real estate ahead of such an announcement doesn't break any laws (edit:
it _might_ have violated employee agreements if Amazon has anything in there
about acting on insider info, not an Amazon employee so I cannot comment on
that). It's not as if this was a short dated deep out of the money call
options play based on insider information (most definitely against the law;
don't do this!).

~~~
jakelazaroff
Maybe not legally, but morally it's certainly equivalent to insider trading.

~~~
wbl
Who is the victim here?

~~~
jakelazaroff
The previous owner of the condo?

~~~
p0rkbelly
How does that make them a victim? They weren't forced to sell at any price.
That's real estate and the article says they are net new construction.

Also, Amazon has thousands of employees in NYC already. LIC is close to
Midtown Manhattan, a few subway stops away and is a neighborhood full of new
construction.

It makes sense for any employees to buy there regardless of any
situation...doesn't?

Since when is "Buying a nice apartment in a desirable neighborhood near work"
a suspicious or criminal thing? Geez.

~~~
jakelazaroff
"How is the buyer of a stock shorted based on insider information a victim?
They weren't forced to buy at any price."

~~~
ryanlol
By this logic, would it not be immoral to engage in any trades when there
exist information asymmetry? There will always be "victims" who do not make a
profit because they made a bad investment.

A person losing money due to insider trading has almost certainly invested in
a company that was not worth what they thought it was. If they’re a victim,
then whose victim are they really? I have a hard time blaming the insider
trader.

------
Kaveren
Just the notion that there could even be a ban about buying real estate based
on insider information is insanity. Not every advantage needs to be legislated
away. Same logic as CEOs hiding who they are when buying real estate
sometimes; there's no moral obligation to inform the seller so they can drive
up the price to make more money when they'd sell for their current one.

------
cauldron
Maybe irrelevant but still interesting:

more than 100 condos and over 100 mistresses, and literally tons of cash at
home, a Chinese state company chief.

[https://www.caixinglobal.com/2018-10-17/fallen-chief-of-
bad-...](https://www.caixinglobal.com/2018-10-17/fallen-chief-of-bad-asset-
manager-had-tons-of-cash-literally-101335639.html)

------
peterwwillis
The President of the United States has specifically stated that he favors
doing trade deals with the leaders of nations who buy his real estate
properties.

If I had to measure, using myself for scale, how little of a shit I give about
two nerds at an internet company buying condos where they may be working next,
it would be at about bacterium-level.

~~~
onemoresoop
What's the relevance with the President here? Is it in contrast with how
little this is important to the president or you think the president profiting
of his public office normalizes this type of behavior, which I don't see the
link to very clearly?

~~~
peterwwillis
We should be seeing news articles about political cronyism, corruption and
favoritism, more than we see articles about two people at Amazon buying
condos. Maybe if they were buying the condos from a politician in exchange for
favoritism would it be news-worthy

~~~
nil_pointer
Are you suggesting there isn't already a bunch of articles about the very
example you gave?

------
rdlecler1
I’m not sure that this is unfair at the individual level. If I’m an employee
moving there I probably want to buy at the current price (which is still
pretty hot) before speculators come in and bid it up and I can no longer
accord to live there. Now if it was to buy and flip, I’d feel that this
wouldn’t be right.

------
lbriner
Wasn't the main scandal here the idea that local government was effectively
paying money to one of the richest companies in the world? I wonder how many
people lobbied their representatives to say that they didn't want their money
spent on enticing a rich business into the area even if it might bring jobs.

------
sdinsn
Sooo 2 employees, out of the tens of thousands that Amazon employs, bought a
condo? Why is this news?

------
stakhanov
What's scandalous about this is that there a journalists out there who would
make a story out of this. Amazon has so many employees that "Some Amazon
employees bought condos is location X in week Y" is probably a true statement
for all X and all Y.

------
Johnny555
I think this only matters to Amazon internally -- if some employees had
advance notice of the move and bought property before the rest of the company
was informed, that's not fair to other employees.

~~~
qaq
How? Maybe they are the employees that have to move to oversee construction or
whatever other reason Amazon needs them there so they had advanced
information. In any case Amazon is under no obligation to inform everyone
about something like this.

------
rhacker
The profit from before this hit and after for a single condo could increase in
value at least 100K easily. I still don't think that's an SEC worthy thing.

~~~
dpark
Because it's "only" 100K or because private real estate transactions are not
in the SEC's jurisdiction? The SEC definitely gets involved for less than
100K.

------
plandis
Amazon already has offices in NYC. Is it really that perfidious that employees
would buy in a new condo building close to the existing office?

------
qaq
So? It's not illegal so what is the story here ?

------
jordache
even if this was based on insider info, there are no laws preventing this..

------
wolfpwner
Insider property buying

