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SF Apartment Therapy & the Short King of Data Centers · The Promote Podcast

• Hiten Samtani (00:04) I don't play golf. I grew up in Brooklyn. The only thing I do with great consistency is eat and drink wine. Will Krasne (00:12) I develop power plants in Pakistan. I'm not a terribly sensitive guy. Hiten Samtani (00:22) Welcome back to the Promote Podcast, your insider guide to the money and many of the CRE markets. I'm Hiten Samtani Will Krasne (00:27) And I'm Will Krasne. Hiten Samtani (00:29) Today's lineup is gonna take you to a bunch of places, my friends. We'll zag from crypto minefields in upstate New York to the quiet wealth enclaves of the Eastern shore of Maryland, which I didn't really know much about. Will Krasne (00:40) Yeah, it's my stomping grounds. live right there. really is. And you'll get to meet one of CRE's megabot characters pun intended in the process. Hiten Samtani (00:49) Then we're going head to the city by the bay to take stock of the carnage and their multifamily market. It's really run topily in full force. Will Krasne (00:56) Finally, we'll pull off the freeway to visit the extended stay rooms in the heartlands of America. Institutional investors are finding alpha between the low thread count sheets. Hiten Samtani (01:05) This is gonna be a lot of fun. We want to give two shoutouts before we begin. First to our sponsor for this episode, Bullpen. They're a recruitment shop dedicated to CRE and you'll hear more about them in a bit. Will Krasne (01:15) And a reminder to check out the Promote Insider, our premium tier for CRE content that just launched and highly recommend you check it out. You get more of us, more premium content and things you won't find anywhere else. Hiten Samtani (01:27) Yep, launching October 15th full on, it's gonna be a lot of fun. Yallah, we gotta start with Paul Prager. I feel like every great story has some kind of Paul Prager type of character in it. Will Krasne (01:42) So Paul Prager is a previously New York based energy mogul, now currently Easton, Maryland on the Eastern Shore based energy mogul. And he took over a publicly traded shell and it's now called Tarawolf. And Tarawolf was a Bitcoin miner, not unlike a lot of the other Bitcoin miner knee data center companies that have been going to the moon recently. Hiten Samtani (02:06) This is a pretty classic pivot so far. Will Krasne (02:08) Yeah, well they had the power and like our good friend Tony Montana would say like Hiten Samtani (02:14) got him. get the money, you get the power. Terrible in the news in a really fun way at the moment a former Bitcoin miner now raising debt to build data centers for Google and I think this is happening quite a bit this trend of Hyperscalers teaming up with former Bitcoin providers super interesting trend but I think we want to talk about the mechanics of how these things actually work. So Will Krasne (02:38) There's been a lot of talk about how the AI boom is a little bit of a circular reference, so to speak, for my Excel junkies out there. NVIDIA is committing to buy stuff from OpenAI, and OpenAI is committing to buy stuff from NVIDIA, and the money's just sort of going around like in a washing machine. And this is sort of turtles all the way down here. Hiten Samtani (02:59) We talked a few episodes ago with our boy Mark Ganzee about a metaphorical lockbox. A lockbox. With CoreWeave and the chip financing, that was fascinating. I'll put that in the show notes. You should definitely check that out if you're Will Krasne (03:11) this. Right, so all of these hyperscalers need energy, which we've talked about ad nauseum, but what's interesting is that it's really expensive to build these things and, your options are like Blue Owl private credit. Or sometimes you get, it's not quite seller financing, but it's like user financing. So TeraWolf is building data centers for Google to take advantage of power that they already have access to. There's $3.2 billion of lease obligations, which Google is committing to, which will flow to TarotWolf. But then Google's also going to backstop the debt financing. Hiten Samtani (03:45) How does that make it easier for them to finance? Will Krasne (03:47) Well, they're doing a securitized debt offering, which is essentially an IPO of debt. Morgan Stanley is arranging it so they're running a road show. When you're running an IPO, you want someone to backstop the IPO because it helps show that there's demand and then it lets you rip the price a little bit. This is no different. So Google stepping up and saying, look, we'll take a big chunk of this, shows other institutional investors that it's real, that they're committed to it, and hopefully bids up the price and lets the spread get a little bit tighter. Hiten Samtani (04:17) it's kind of like what Cohen and Stierus did with the Hudson Pacific properties recently. Will Krasne (04:21) It would go partners in their IPO as well. You just commit to backstop something again. It's like maybe you get a little bit of better pricing and then the folks who are arranging the financing can show that there's a lot of demand and then hopefully get a tighter spread. Everybody theoretically kind of Hiten Samtani (04:34) done this before with Terawolf and they took an equity stake in Terawolf as part of this deal. Yeah. So I think that is interesting where you're betting on you're the customer of that company. You're also the backstopper of that company and then you will soon be an owner of that company. Will Krasne (04:49) Well, I mean, it's no different. Google is famous for doing this. mean, they own what a big chunk of open AI. They've got a bunch of anthropic. They own a bunch of these different companies. We're helping you create all this value. Like let's get paid in there too. But I think what's interesting here too is talking about the energy, right? So we've talked about data center alley in Northern Virginia. We've talked about all these places in Texas, but what's interesting about Tara Wolf is that they have a data center campus in Lake Mariner, New York. Exactly. So they have super clean energy. Hiten Samtani (05:12) York. Will Krasne (05:18) tons of cooling. It's also a little bit less densely populated than like Ashburn, Virginia. Prager had been preaching about this for a long time saying we can deliver power more cheaply than anybody else because we have access to this hydropower, we have the cooling, all that. We don't have to pipe it all in. Hiten Samtani (05:32) And we've talked about everything. One of the biggest bottlenecks and an emergent, I mean, it's going to get even more exponentially challenging over time is how to get your power. So when people are talking about data centers, they don't really talk about space at all. Like space is not ⁓ a number or metric that really gets thrown around. It's just like, yes, like how many megawatts or whatever, how many gigawatts? then everything kind of flows from. Will Krasne (05:49) limiting factor here. gigawatts. You're seeing this all over the place. mean, just in the last two weeks, people are just rebelling against utility rates going through the roof, like water usage going through the roof. You got to find a place to do this where you're not going to have all the NIMBYs coming out against you. Look at Lancaster, Pennsylvania, big data center project going on there and it's caused a huge backlash. Hiten Samtani (06:21) Some of the suitors that might step up to finance this thing, we're speculating here, obviously. The most vivid and massive example that comes up in recent weeks is what Metta is doing in Louisiana. They did this face-off between Pimco and Blue Owl, and I think it was Apollo and KKR on the other side. Morgan Stanley has kind of a nice niche here. They ran that process as well. And basically in the end, Pimco and Blue Owl won out. And it was a $29 billion financing we're talking about. So private credit's getting all up in this business. Will Krasne (06:49) What's interesting too though is that a lot of the people who own these things are having trouble selling them because it's like who's gonna buy this thing with tons of CapEx like uncertain how long that the cash flows are gonna be durable because the tech changes so quickly. Hiten Samtani (07:02) We're talking about Terrewolf because of this Google thing going on, but really we're talking about Terrewolf because we want to talk about the man behind it. Mr. Paul Prager, describes himself as a short fat guy from Brooklyn and he's built quite an empire. Will, why don't you take us to your haunts of the Eastern Shore of Maryland where Paul Prager is basically remaking it down in the mold of the Hamptons, but going for this like maximal vision of it that I think is so interesting. Will Krasne (07:33) I'm really proud of myself that I was able to hang on this long in this story without talking about what's been going on in Eastern Maryland. Hiten Samtani (07:39) I put a note in the show notes that I'm like, will contain yourself. Go ahead. Will Krasne (07:42) disclosure, my in-laws lived in Easton. I've been to a lot of these restaurants and I've seen them in the wild. Hiten Samtani (07:48) Are they as crazy as described in this excellent Washingtonian article? Will Krasne (07:52) I mean, he got like the dessert chef from Perse to go to a bakery in Easton, Maryland. It's nuts. anyway, so Paul Prager, he went to the Naval Academy, which is just over the Bay Bridge from the Eastern Shore, fell in love with this area, made a bunch of money in energy in New York, and then was helicoptering down here to his massive estate and just said, you know what, like, why don't I set up shop here permanently? And that's what he did. So he took over essentially all of downtown Easton, bought six, seven, eight buildings, a couple of square blocks. Hiten Samtani (08:24) There's a phrase in Hindi which basically translates to someone has like a germ is what they say. Like a person like Paul Prager cannot just move to a town and just exist. They kind of have to like, they kind of have to do a thing. And that he just decided to run riot on this once very wealthy, very like classy, but quite sleepy enclave. Will Krasne (08:45) To put it in perspective, so Easton is just a little bit inland from the peninsula from St. Michael's, which is where they filmed Wedding Crashers. So it's like where Sac Lodge's family is like Donald Rumsfeld, like the Bush's all had houses out there. Very wealthy, very prominent area for like the DC glitterati. And so Paul's like taking this place over. He's got the $20 solid restaurants, the crazy steakhouse, the insane bakery. all these things and you wonder like, why is he doing this? It doesn't even really make sense. Like I'm sure he hammered his money on all of it. He even has a company like a separate hospitality company that runs all of these things. So I remember I was at the $20 salad place, which by the way, delicious. I'm like, why is this here? Hiten Samtani (09:28) What is Mark Rowan charging over at Dior? Will Krasne (09:31) We're not there yet. we're headed in that direction. But as I'm sitting there in line, like eight guys my age invests walk in and I'm like, ⁓ right. He's got his prop trading arm here and he needs all these guys to have stuff to do. Hiten Samtani (09:46) Kind like we've talked about with Ken Griffin, Citadel in Miami and Steve Ross in West Palm Beach. You need to create that rich man's life so that your rich men can go do something. Will Krasne (09:56) a lot about campuses and they come in different shapes and sizes but honestly he's like kind of turned into like Ben Gazara from Roadhouse where he's like taking over the entire town. Hiten Samtani (10:07) I got the 7-Eleven, I got the Potamat here. Will Krasne (10:10) Christ, JCPenney is coming to me. It's worth checking out because there are these little niches everywhere and not everything's got to be in Midtown Manhattan or in San Francisco or LA. You can run it all from Easton, Hiten Samtani (10:12) And because So we talk a lot on this show about how CRE is such a specific, weird world onto itself. So when you're talent hunting in the space, it makes sense to partner with a recruiter who lives and breeds it. That's where Bullpen comes in. They're a talent shop solely dedicated to CRE, and they can fill both fractional and full-time positions, hooking you up at all levels from analyst to C-suite. Check them out at bullpenre.com to get started. That's bullpenre.com. And please tell our friends there that the promote sent you. Will Krasne (11:00) So one of my good friends said that real estate is essentially buying a small microcap business that you can walk in and it's pretty grim. And that's totally the truth that you don't you aren't just trying to hire smart people. need real estate people. Folks who know real estate. You don't need Goldman, Deutsche Bank, Alarm. No, no, no, no, no. You need real estate people. Hiten Samtani (11:18) class at Harvard times, And that's where Bullpen comes in. Check them out at bullpenre.com. Okay, I love talking about San Francisco. You and I both have a fondness for that city. You and I both feel like it is a city that should be greater than it is. And there are some vibes coming back. However, in the multifamily market there, man, it's been carnage. I can't quite understand what is going on in SF multifamily. Like you just see these portfolios getting ravaged. Man, Veritas is at the risk of losing yet another portfolio. This is 1500 units. This comes maybe months after they lost 2,500 units to Ballast and Brookfield and all that. So I think we should talk more broadly about what the hell is going on in SF multifamily and talk about some of the distress there. Will Krasne (12:27) Well, you could potentially say, hey, there's no bad deals, only bad cap stacks or bad regulations. Hiten Samtani (12:33) Unlike in New York City, most of the shit that we're seeing right now in SF in this space is not a casualty of rent regulation laws. This seems to be more broken cap stack situations. Will Krasne (12:44) Finding good real estate isn't the thing. Finding the risk-adjusted return is the thing. And one of the ways you can blow yourself up is you can overpay for a good asset. A great asset doesn't mean it's great deal. And we sort of found that out a little bit with Veritas on their mega portfolio of these walk-up deals in San Francisco. Hiten Samtani (13:03) It's not even the purchase price that can be the problem. It's the subsequent financing of this thing later on that can really get you down. Will Krasne (13:10) some these groups, not talking about Veritas necessarily, but some of these guys, when you see them give back a building that they've owned for 25 years, like they've taken the purchase price out in multiples in terms of debt financing. like, let's not go cry. Let's not worry for them. Maybe the case here, who knows? But they've lost so many buildings. Good gracious. Hiten Samtani (13:28) If they lose this package, which they now save our task, is run by a guy called yet Pang ⁓ who goes by Pang. Pang says he has a capital partner waiting in the wings and might be able to rescue this portfolio. But if he does lose this one, he's lost about 4,000 units in the past year plus. Will Krasne (13:45) Is that like my girlfriend is from Canada and you haven't seen her but she's really hot? Hiten Samtani (13:50) Or Yitzhak Tesla coming up with this emergency financing for 172 Madison. Who knows, but I think it's important here to start paying from Veritas had less than 100 units when he took control of in one fell swoop, 2000 plus units back in 2011 or so. Will Krasne (14:09) And let's talk about how he took over those units because he's got a great line on this foreclosure. Hiten Samtani (14:13) He's been reading too much of the daily stoic, but okay. So in 2011, there was a family called the Lembi family. This is one of the great families of San Francisco apartment. So compare them, let's say in New York to the Dursts or the Lafrax or the Rudens or something like that. They had amassed this empire of about 300 buildings. Things went south at some point. In 2011, Veritas, at that point, Pang only owned fewer than a hundred units, paid $500 million to take over 2,000 units. Like this is the thing about real estate that I absolutely love. If you can convince a capital partner to come in with you, you can go from minnow to Titan like that. Will Krasne (14:50) I'd say a fair comparison would be the guy who has the epitaph on the promote newsletter. I'm worth a fuck ton of money, bro. Raphael Talladano, who took down a massive rent-stabilized portfolio in New York out of essentially nowhere. But I think let's just double-click and God, hate saying double. Hiten Samtani (15:05) You sound like a douchebag VC, don't do it. I Will Krasne (15:08) Let's dig in on how this portfolio came to be because as you said, the Lembi family owned 300 buildings, a massive amount of apartments. And they lost 91 buildings to UBS in the middle of the recession, so to call it, like late 07, early 08. There's no bid at that scale. One of the things about putting together these smaller building portfolios is that people don't necessarily want to take that whole thing. Especially if you were like one of the big buyers, they're so operationally intensive that if you're a big player, a lot of times you can just, the juice isn't worth the squeeze on the asset management side. Like I think sometimes it's like the poor asset management analyst who's got to like do the financials for 90 buildings, you know, each month, like God, and take the whole month. And they had to sell them off in little chunks. People would take onesy twosies, couple here, couple there, and then paying came in and took 2000 of the units. Hiten Samtani (16:02) In one go. And this is what he said. had a great line. This is when things were going good. So these guys were giving a lot of interviews. He said, I kind of just hung around the hoop for a year or two and said, Hey, let's see if we can work something out. And what he worked out was a deal with BOWPOST, our good friend, Seth Klarman, who's also backing RXR on Gemini, which we talked about a week or so ago. And Veritas just kept growing after that incredible momentum. I think at its peak in 2022, Veritas owned about 6,500 units in SF. SF's not that big a place, that is giant. Will Krasne (16:34) Oh, that's huge. again, they're all small buildings. It's not as if they're like, oh yeah, we own 15, 400 unit building. Hiten Samtani (16:41) These are little nibbles, but you put them together, pretty substantial. Will Krasne (16:45) Yeah, so again, hugely operationally intensive. You can see why they were able to get Balpost involved in 2011 because there's a couple of buzzwords like we're distressed, we're buying it from a lender. Role play, operational efficiencies, institutional quality asset management on mom and pop assets. Hiten's rubbing his hands. Yeah, you can see why this pitch was pretty compelling. Hiten Samtani (16:55) Roll up play, The debt markets proved it out, right? In 2016, they go in, they score like an $800 million alone package from Goldman. Will Krasne (17:14) And that's what they've defaulted on now. But again, as we've talked about too, like if you're able to get a non-institutional asset class to become institutionally financeable, like that's the holy grail. Hiten Samtani (17:24) So in 2023, the default from there, the lenders put I think a nearly about a billion dollar pool of debt on the market. this is where it gets a little bit spicy. There was a guy who used to work on Veritas team called Ryan Brewer. And Mr. Brewer left Veritas at some point, he founded a company called Ballast Investment. Will Krasne (17:44) So ballast one of the co-founders is a guy named Greg McDonald who worked at Carlisle and when I was a young padawan starting off at Carlisle You get a mentor who's like a VP or higher Greg McDonald stopped by my desk said hey great to meet you I'm your mentor and then a week later left Hiten Samtani (18:02) So Ballast comes in when things go to shit here in 2023, Ballast comes in and they buy up the debt. And we're like, how does Ballast have all this money? It turns out behind Ballast was your good friends, Brook. Will Krasne (18:16) Behind every successful man, there's a great woman and behind every big purchase of defaulted debt, there's Brookfield. Hiten Samtani (18:23) That's right. And so they come in and Ballast becomes, just by dent of this deal, they become one of the biggest landlords in the city themselves. a bit of a tangent that I want to talk about that I think is so interesting. We at The Promote, we've covered a lot about the special servicers becoming main characters in the CRE story in the last, let's say, 24 months or so. Over here, out of all the debt that traded that Ballast bought with Brookfield, etc., did you know there was like $164 million held back by the special servicers? Will Krasne (18:56) Well yeah, because I read the promo. Hiten Samtani (18:58) Well, it's amazing. It's like this black hole. Can you talk a little bit about the dynamic between bondholders and the special services? Will Krasne (19:05) I mean the special servicers are getting paid fees. It's a hugely lucrative business to manage these things and so if they get resolved it's not always you know it's sad. One thing I want to highlight is that Libra Max Capital was part of this thing which that's the guy that Ryan Gosling played in the big short. It's a lot of Hiten Samtani (19:22) I get it. I can feel you judging me. I love it. There's a pretty big conflict of interest baked in when it comes to special services and bondholders, right? Special servicer wants the deal to be kind of in various states of undress for fairly long because that's how they get compensated. Will Krasne (19:40) Yeah, no exactly, they don't want it to be resolved. Hiten Samtani (19:45) As we're talking about now, Ballast has become one of the largest multifamily landlords in SF. Okay. And they've gone and bought another portfolio in the previous couple of years, packed by Goldman Sachs. Will Krasne (19:56) Well, they seem to have misplaced that one. Hiten Samtani (19:58) They did. So even as they've acquired the Veritas portfolio, they've gone and lost the one that they co-owned with Goldman Sachs. So Goldman took a bath there. They were the equity there. Or I want to spare a moment of silence here for the sorry lender, the sorry lender, should say, RBC. RBC is getting bodied left and right in San Francisco multifamily. It's kind of tragic. Will Krasne (20:22) Maybe they were, you know, got confused by the exchange rate, who knows. That's tough, tough business. San Francisco is in the middle of a little bit of a renaissance. We've got institutional capital flooding back in. The office market has rebounded significantly. But most importantly, the vibes are better and the vibes drive almost everything. Hiten Samtani (20:44) Narrative drives flows as we like to say and SF is a city on the upswing, definitely on the rebound, but a lot of these cap stacks were constructed when things were a little bit different and ⁓ we're just going to see a bit more of a reckoning before there's some kind of new normal stable situation. Will Krasne (21:02) In San Francisco, you've got sort of the perfect storm of NIMBY and then also just not a lot of land. There's not places you can really develop in San Francisco. And so you can see the thesis here, which is that if you can own a huge chunk of the stock, like you can be a price taker as the city's on the upswing. Hiten Samtani (21:20) I think there's gonna be a lot of big winners to be had in the SF multifamily market. I think one of the big Veritas portfolios was also bought by a company called PCCP. Know anything about them? Will Krasne (21:30) They interviewed me for a job in 2012 and did not give it to me. Sorry. Yeah. Big on the credit side, they've done a lot in BTR. So they're one of the largest BTR owners in the country. Very creative, high octane. So this sort of makes sense as a play that they would be backing. Hiten Samtani (21:34) It's okay. But anything else? What they did here was they bought into Ivanhoe Cambridge's stake, another Canadian venture. So they bought out Ivanhoe Cambridge on this big Veritas portfolio. Will Krasne (21:59) Yuff man, rough one for my friends north of the border. Hiten Samtani (22:02) When I make a lot of money at the poker table and then I lose even half of it, I'm depressed. However, our man Pang has taken a completely different approach to this whole Rentopoly game. When he was talking about this portfolio that he lost, that he went from the biggest, biggest owner in SF Multifamily to, you know, still a major player, but definitely hobbled quite a bit, he said the following, I got them in the same way that I lost them. Will Krasne (22:29) What a Zen perspective and may we all be so grounded. Hiten Samtani (22:34) Amen. We want to tell you about the Promote Insider. That is our new premium tier that's launching October 15th. And listen, if you want to go even deeper down the CRE rabbit hole, this one's for you. Will Krasne (22:58) Think expert columns from practitioners deep in the mix like moi, capital stack breakdowns, first dibs on events. Yes, we're going to be live in person. soon. And bonus episodes of this podcast. Hiten Samtani (23:10) That's right, plus a whole new interview section and so much more. Founding membership start at $240 annually. That's 20 bucks a month. Go to thepromote.com slash upgrade to get started. That's thepromote.com slash upgrade. All right, sir, dusty sheets and all that, let's go. Will Krasne (23:28) Yeah, dusty sheets indeed. Blackstone and Starwood Capital Group are preparing a massive $2 billion CNBS financing for the former Extended Stay America portfolio. Hiten Samtani (23:38) This is the one they took private when in like deep COVID, Will Krasne (23:41) They took it private deep in the depths of COVID. Blackstone had been involved previously. Starwood bid on it last time it went private. So this has sort of been playing hot potato among private equity in the public markets for the better part of a decade post GFC. Starwood's been in Extend and Stay for a long time, though. They bought in-town suites in the early 2010s. They bought a big bolt on to that portfolio. The former CEO of that company sold TA, the publicly traded entity, and he's now on another project. But again, we're highlighting this because it's another example of alternative product types being the area of focus. Hiten Samtani (24:14) We talked last week about manufactured home communities and Brookfield paying $10 billion for yes communities, is going to see GIC maybe make one of their biggest ever exits and StockBridge maybe make a very, very nice promote. So it's again, we've talked a lot on the show about how institutional money, when you got to put money to work at scale, you might have to find alpha or just find different avenues to put money to work than your normal offices, hotels. Will Krasne (24:41) Marina's, iOS, AKA shitty parking lots, and extended stay hotels. But extended stay hotels have a bunch of quirks, which I think are really interesting and that we should sort of focus on for a little bit. They operate a little bit more like housing than hotels. Hiten Samtani (24:57) What's the normal metric in hotel? Revpar. Is that still the alpha metric here or what? Will Krasne (25:02) No, it's Rep Paw, per week. I will say I preferred RevPaw than W RevPaw which is weekly RevPaw. RevPaw is a little cleaner. Hiten Samtani (25:12) There's going to be like five listeners who care about what you said, but we'll keep it at. Will Krasne (25:16) But I do it for those five. We talked earlier about how real estate is potentially a micro, a small, shitty small business that you can walk into. This is really the case here. So these things, it's really all about how you operate it. And the reason you do a weekly model versus daily is that you can change the sheets or clean the rooms like once a week down from like every other day. Hiten Samtani (25:37) At some point, my cousin was working in a place called Tewkesbury, Massachusetts, just outside of Boston. He was in one of these for three months and I went to visit him and I stayed in one these and they do, there's like a full clean and then there's something called a room refresh, which all they do is like they spent five seconds in your room doing something. And yeah, this is one of those extended. Will Krasne (25:43) Okay. I'm just glad that your skin made it through without like melting off No, so we talked about this a little bit of an alternative asset class within hospitality as opposed to sort of your trophy full service resorts and and all that but this was valued for the purposes of financing at an eight point low eight cap rate which Yeah, and yeah, it speaks to how these assets are perceived in the market, you know Speaking of another person that we've mentioned the podcast previously Hiten Samtani (26:24) Yeah, your boy Tyler Morse was talking these up in 2022. He said, you know, this is funny because now he's completely changed his tune. He said, fancy doesn't always mean good. This is the guy who is now buying Soho House. TWA Hotel. Yeah. Will Krasne (26:35) Soho House, the BT Tower. It's a little bit of do what I say, not what I do. he's right. The margins on these things are so strong relative to other asset classes and product types within hospitality. You can manage them very, very inexpensively. You staff these things really light for people. Five FTEs, something like that. Because again, you don't have to clean it that often. Hiten Samtani (26:56) Starwood is hiring the employees that would then go in. It's not like an independently owned, there's no franchise model or anything here. Will Krasne (27:03) Yeah, this is a great point. This is not like franchised necessarily. You're not hiring Driftwood or Hersha to manage these things. Like InTown was an operating business and so they've managed that themselves. And it's the same, assume, with the extended state of It's considered somewhat recession resistant because if you can't afford first, last and security deposit for an apartment, like these are apartment substitute. I've toured assets like this where people live there for 20 years. Wow. What was Sean Baker's movie? The Florida Project. Like it was literally about Hiten Samtani (27:32) And so how are the markets seeing this? How are the debt? mean, two billion CNBS is massive. Will Krasne (27:37) like a pretty tight cap rate. Like that's, you know, not too far off of what like a good retail center trades for the lodging recovery post COVID has sort of been bifurcated. So you've got like Hiten Samtani (27:46) Ultra luxury, absolutely killing it, ripping it right away. A white lotus style hotel. Will Krasne (27:50) Vlad Daronan making it in Hand Over Fist. Hiten Samtani (27:54) Wait, wait, did you see that now one Beverly Hills that we've talked about extensively on this podcast went without anything changing, by the way, went from a five billion dollar hospitality project. Boom, there was a Wall Street Journal article a couple of weeks ago. It is now a ten billion dollar hospitality project and nothing in the makeup of the plan has changed. Will Krasne (28:14) Every $20,000 chair is now $40,000. He just upgraded it. Hiten Samtani (28:19) So we're talking about ultra luxuries having a moment, a real Renaissance. What is happening kind of in the budget mid-tier situation? Will Krasne (28:27) Those are tough because a lot of those were based on corporate spending, has sort of rocked. you know, if you were Deloitte and Bain and McKinsey, and I know the Bain and McKinsey people are going to be mad that I lumped Deloitte in there, but they were flying people into random companies and you were staying at the Hilton Garden in Wichita. Yeah, like those that's gone, like not gone, it's hugely downgraded. And again, with Hiten Samtani (28:45) months at a time, etc. Will Krasne (28:51) hospitality, you have a lot of operating leverage, which is great if you're above sort of breakeven, but if you're below it, it's really, really, really tough. So those things have gotten really hit hard, but the stuff at the bottom end, the extended stay, things like that has performed significantly better. And again, the cashflow margins here are so much higher. You can run these things at like close to 40 % NOI margins. Hiten Samtani (29:12) Wow. So we're so obsessed on the show about narratives from the very, biggest boys and how they position these asset classes. For example, Blackstone's talked about data centers as their quote, lens into the gen AI economy. So how is Blackstone talking about extended stay hotels? Will Krasne (29:28) I don't really see John Gray running around the Extended Stay Hotel in Conyers, Georgia talking about it. So that should sort of tell you where they think it is. Part of the reason why they were able to do this is that they've always seen them as not as good a business as Full Serve or Select Serve. you know, first of all, people didn't think Select Serve was as good a business as Full Serve. Select Serve is better. And then Extended Stay is often better than Select Serve. So not as sexy, not necessarily what you want to talk about in fundraising meetings, but, you know, they're cash flow engines. Hiten Samtani (29:56) They do the numbers. Will Krasne (29:57) they do the numbers. Hiten Samtani (30:07) That's it for the Promote Podcast this week. Crypto miners closing up to Google in the data center game. Will Krasne (30:12) Great characters building entire towns out of whole cloth. Hiten Samtani (30:16) Just short, fat guys from Brooklyn running amok on the Eastern Shore. Billion dollar apartment portfolios being won and lost on the regular, with poor Canadian lenders getting rocked. And more signs that institutional money is trying to slip into less comfortable sheets. A shout out to our sponsor, Bullpen. Check out their dedicated CRE platform at bullpenre.com. That's bullpenre.com. Will Krasne (30:40) And again, check out the Promotes premium tier at thepromote.com/upgrade. Hiten Samtani (30:45) That's thepromote.com/upgrade. Can I read you one more review that we Will Krasne (30:50) Take all my ego, go for it. Hiten Samtani (30:53) CRE without the problem. The Promote is where intelligence meets irreverence. Hiten samtami. And Will Krasny, don't just cover CRE, they dissect it with rigor and narrative wit. Narrative wit. It's not limited to cap stacks and covenants, it's power personalities and the chutzpah. Try to say it? Will Krasne (31:13) Hotspa. Hiten Samtani (31:14) There he goes, that shapes skylines. This is a must-listen for anyone seeking substance without the typical pablum. I really like that. I think it's a good way to end and it's a good reminder for us to keep bringing it each week. Well, I'll see you next week, dude. Thank you so much. Ciao. Will Krasne (31:28) Thank you.