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Not Easy Being [SL] Green & TPG's Shelf Life · The Promote Podcast

• Hiten Samtani (00:03) Being a public company that invests solely in the most competitive, highest stakes, and most complicated market in the US makes for a pretty hard job. Will Krasne (00:10) And imagine that's your second hardest job. Marc Holliday also the chairman of NYRA which in this environment, I mean, my God. Hiten Samtani (00:26) Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani Will Krasne (00:32) And I'm Will Krasne. Hiten Samtani (00:35) A shout-out to our sponsors, Real Property Captive. It's the first group captive insurance for mid-market GPs. Will Krasne (00:40) Loan boss, the best in class CRE debt management software. Hiten Samtani (00:43) And Bravo Capital, a leading HUD and bridge lender that lives and breathes cap stacks. This week we're gonna dive into the high stakes, high reward, not for shareholders though, world of SL Green, the mighty REIT that is New York's largest commercial landlord. Look, from a deal junkie standpoint, SL Green's king of the hill, no doubt. But no matter what it does, it can't seem to get Wall Street to love it. Next, we convert our dollars to Lek and we head to Albania, where Jared Kushner is trying to create the next St. Bart. Will Krasne (01:04) Very sad. Hiten Samtani (01:11) And finally, we load up those ten cent bags and go shopping for grocery anchored retail with TPG and friends. Will Krasne (01:17) What other real estate podcast is gonna mention Lek? I mean, come on, like that's why you guys are here. Look forward to getting into all that. But before we do, let's get started with the punch list, our signature rundown of the newsiest news in C R E. Hiten Samtani (01:23) Seriously. Okay. I I can't see their headlines without laughing. Brookfield is winding down in DC. Will Krasne (01:43) This is our weekly Brookfield segment sponsors. Hit us up. And man, you hate to kick somebody while they're down, but not the most unsurprising of news given the foibles they've had in the DC office market. They went really big into it pre-COVID with suburban office, the stuff that got just absolutely annihilated during COVID. Hiten Samtani (02:02) And all the stuff that we read about the office parks and all the sprawling things. Will Krasne (02:05) Bethesda Towers, which we talked about last week, which they sold for an 87% discount. So what they bought it. And unfortunately, though, this is what happens because if you are one of the folks in that group, you're the carpenter where everything is a nail. You want to go get as much of the capital at Brookfield and allocate it to your thing. You're not looking in Wyoming. You're looking in DC office. And so if the DC office environment is bad, and that's what happened here. You could be the best of the DC office guys and still have gotten crushed. There's no more Brookfield DC office. Hiten Samtani (02:34) The way they put it was quite funny. They said, Our operating team is always scaled with acquisitions and dispositions within our portfolio. Just like Orwellian nonsense. Will Krasne (02:43) On dispositions are Deed and Lou's included. Hiten Samtani (02:45) Will this is I think a fair question at this point with Brookfield and some of these others. Are fundraising and investing essentially on parallel tracks and never the twain shall meet? Because that's how it feels with some of these companies. Will Krasne (02:57) To an extent, we say that returns don't matter, and that's mostly true. But what you cannot do, you cannot fail unconventionally. If you fail conventionally, totally fine. Because DC office, people have made fortunes office. JPG Smith, that stock's gotten killed too. Is anyone calling for Matt Kelly's head? No. DC office, my gosh, bad vintage. What are we gonna do? But if you were to go into something and say, you know what, we're gonna go into marinas on the Potomac River, you know, or something crazy and you fail, that's really bad. But DC office, you know, it's fine, you know, it's a small part of our portfolio. Wipe your hands. Hiten Samtani (03:32) Okay, next one. This is I think one of the world's great investment seats. So we've talked a lot here on this podcast and more broadly in CRE about one of the great family offices putting together, I think a baronial portfolio, $25 billion for Amancio Ortega's Ponte Gadea. The promote took a look at the guy running point on this, ⁓ Roberto Sebera. What a seat. Will Krasne (03:55) It really is. The family office seats like this. It's almost like commercial brokerage. An average one is not great. Yeah. And basically negative. And the best is worth 10x what you think it should be. You wake up every day, you try to generate returns, you try to find a lot of deal flow, all these things. This guy's has one job. You manage one guy and don't get fired. That's really it. The mandate is it's broad, but it's very specific at the same time because this is not get rich. Yeah. Mansertech is already rich, super liquid. You can look up how many hundreds of millions of dollars a year, if not more, are dividended out of Ingitex. That's gotta go somewhere. Hiten Samtani (04:34) Course of the Inditex IPO, he created Pontegadea that functions as a combination between a parking spot and a tax shield for a centi billionaire. Will Krasne (04:43) Precisely. Spain is also notoriously very difficult on taxes for folks both in Spain and out of Spain. I do you remember? Hiten Samtani (04:50) When I was in Spain and I was telling you I was in a cab and the driver was kind of ranting about Ortega and I'm not paying any taxes, which is exactly here. Yeah. Will Krasne (04:59) Yeah. Well, this is why. Sean Connery at one point, they're coming after him for back taxes. Winners go home and fuck the prom queen. Shakira recently won a big victory against the Spanish Taxing Authority for tens of millions of Euros. So people have always been trying to get money out of Spain. That's why all the Real Madrid players, their IP is licensed in Isle of Man or somewhere. That's where they get their salary. It makes a lot of sense. And they're buying creme de la creme stuff, but not necessarily what you see a lot of times from Asia. Hiten Samtani (05:21) Yeah, exactly. Will Krasne (05:28) Where they're gonna buy the Sony building or something super trophy like that in New York. These guys are buying cash flowing assets. They're paying big prices. It's not just the high class office, the high class retail, the best multi. They bought the largest Starbucks roasting facility in North America in Manchester, Pennsylvania, which I'm biased because I invest in that market. It smells like coffee, it's on espresso way. What else do you want for that asset is as good as it gets in the country? I think Hiten Samtani (05:47) It smells like coffee, doesn't it? I think it's an interesting seat to be in for another reason. You walk into a market, you could come in brand new and you're automatically one of the two or three most important people in that market just 'cause of the money behind you. Will Krasne (06:05) Your Sidney Sweeney walking into the bar where everyone just Whoa Scooter Braun now is her boyfriend, which ooh my guess. Hiten Samtani (06:12) It's news to me, really? Yeah. What do you think Roberto's getting paid? Do you think he's making as much as a humble fund manager at Brookfield hemorrhaging money all over the place or Will Krasne (06:21) Definitely not. Though he did get appointed to the board of Indotechs, maybe he has some sort of agreement there. But I would be surprised if this was a huge operation. I bet these things run really lean and a lot of the property management, asset management's outsourced. So it wouldn't shock me if there's 10, 15 people putting out all this cap. Hiten Samtani (06:39) I can picture one red phone directly to Ortega's office and the other red phone to their go to broker in that market and that's it. Will Krasne (06:45) That red phone probably doesn't get called but once a year or something like that. Hiten Samtani (06:48) Okay, next one. The Chicago Bears. Should we call them the Hammond Bears from now on or what? Will Krasne (06:55) They might as well be the Pawnee Bears and Ron Swanson's giving the permits for the new stadium or something like that. Are they gonna bring back the coach Ditka versus Gad guys from the 80s? They were founded as the Decatur Stalies did not know this. So affiliated with the city of Chicago, one of the largest in the country, and Cook County can't get out of their own way to figure out how to keep them. Hiten Samtani (07:11) In nineteen twenty one. And we've seen this more broadly with the Ken Griffin breakup for one, so many businesses leaving, so many headquarters re-domiciling, right? And this is part of it. What is the real estate play here? Will Krasne (07:30) real estate play, I think, is secondary. The real play now is if you're a Chicago Bear, go get the nicest penthouse in Hammond and save a ton of money on taxes. It's also important to note that not all sports teams are created equal. We've talked about sports real estate becoming an asset class unto itself, but in order to fund that, it's hugely capital intensive. And the McCaskey family is one of, if not the poorest, in quotes, NFL owners. One, they don't have the outside business to fund this, like say The Heed Khan of Jacksonville Jaguars or somebody like that, or Bob Kraft, or Steve Ross is the best example. And they don't have the ability to go attract and raise that capital like someone like Josh Harris or a private equity person who capital raising is their job. So their options to build this new stadium in especially 'cause Cook County isn't going to step up and give them a ton of private financing, because Cook County, as we know, is the Mordor of property taxes. Hiten Samtani (08:04) Steve Ross. Next one. So Karen Bass has secured her spot in the Merrill runoff in Los Angeles, and at least the real estate guys in my orbit were convinced Spencer Pratt was gonna be alongside her, but not so much anymore. Will Krasne (08:40) No, Nietzsche Rahman has climbed up Hiten Samtani (08:43) She surged past him in the last couple days. Will Krasne (08:45) Obviously he's claiming fraud, all these things, but I think it's just real estate people live in a bubble and we all shouldn't be surprised that a guy who bankrupted a crystal business, which by the way, I bought one. I bought one for my sister at one point and also bankrupted it himself, couldn't put it together and and get a lot of votes. Hiten Samtani (09:06) This is the bubble that a lot of our CRE brethren live in and ⁓ listen, ignorance is bliss, I guess. Will Krasne (09:12) Well, it's also one of those things where you look at his base of support and you look at the people who are actually eligible to vote in the LA LA mayoral race, and it's not exactly a concentric circle. Shouldn't be that much of a surprise. LA, it's not San Francisco where they've gotten their act together. It's not New York where they've gotten their act together. So clearly there needs to be changes and hopefully at least the scare of Spencer Pratt and that sort of populist blow crime, fix everything, get it done. Ethos makes its way into the city 'cause LA, one of our great cities, and we need to see it back on top. Hiten Samtani (09:46) Okay, this one's sad. I was reading the Graydon and Carter memoir and he talks about throwing a party for Billy Wilder, the great Billy Wilder, and basically no one showed up. And I thought of it because I read about Paul Massey, his brokerage, selling to some Boston based shop, or selling is a big word, yeah. And I I felt the same way. This guy was one of the giants of New York real estate brokerage, but really couldn't figure his stuff out once he sold to Cushman and tried his next act. It just didn't work. Will Krasne (10:13) No, he had a kicksotic attempt to be mayor, founded B six, but never really found purchase there. I think there was a lot of Hiten Samtani (10:20) Building by building, block by block. That's what it stands for. I got sick. Will Krasne (10:24) I kinda like the name and but just could never really find purchase there. It never really worked. You wrote about this very eloquently that he was really the ops guy. And that's great. It's super important. You need it. But you need the juice. Yeah, you need the sales guy. You need to have the pipeline replenished constantly. And he just never really was able to do that. And apparently it also lived pretty large. Hiten Samtani (10:36) You need the salesperson, yeah. Personal and professional financial problems. He struggled to make rent at B6. His house was at risk of foreclosure. He's had his tough times. The main point for us here, brokerage is a sales business. You can put a framework of an operation around it. And Massey certainly did that at Massey Knackle, which was a powerhouse back in the day. His partner in that business, Bob Knackle, is a salesperson. So he could say all this nonsense about AI-powered brokerage and stuff with his new venture, Knackle. It doesn't really matter. The fact is Knackle can sell and he can sell himself out of trouble if he ever gets into trouble, whereas Massey never really had that. Will Krasne (11:21) Bob, even in the old days of Massie Nackle, talked about how having good credit is really important because he would float the company on his personal credit card until they got the next big sale and then pay everything down. But yeah, to your point, God, it must have been Paul Krugman sook to my high school class saying that writers might not have jobs, ⁓ lawyers might not have jobs, but he knows gonna have jobs. It's the peanut guy at Camden Yards who has the things on his ears because that guy can sell. And that's what Bob could do is Bob could sell. Hiten Samtani (11:47) And Massey could not sell, unfortunately. All right, that's it for the punch list. When we come back, we'll be riding up the elevators at one Vanderbilt. Well what if I told you insurance could become an asset instead of just an expense? Will Krasne (12:08) I'd say you're trying to sell me something, but also I'm interested. Hiten Samtani (12:12) Fair. Here's the math. You spend two million on insurance annually, loss ratio is well under 30%. Over five years, that's about ten million out the door, zero return. Will Krasne (12:21) Painful, but accurate. Hiten Samtani (12:24) What if 7 million of that built up in reserves that you actually owned? Real property captive built specifically for scattered site GPs. Top carriers issue policies for lender compliance, reserves stay in your account, and after a few clean years, you're converting spend into equity. Will Krasne (12:27) Pretty interesting. Tell me more. I like this because that's what the big boys do. Hiten Samtani (12:42) Exactly, and now it's accessible for mid-market drivers like yourselves too. Check out the platform at rpcaptive.com, that's rpcaptive.com, and tell them the promote sends you. So this has been one of your hobby horses for a while and I figured we gotta ride it to the Belmont Stakes. Let's go. Will Krasne (13:15) I really enjoy that I have a personal brand, that certain people know certain things about me. So when something happens, I'll get like twelve texts. This is one of them. Hiten Samtani (13:22) SL Green Realty. It is the alpha of the New York real estate world. It's a mighty REIT. I think they own about 31 million square feet. They've got a burgeon and credit division. They're developing a ton. They're doing a lot of things, and we're gonna get into all of them. But the tension here, the reason this is interesting is that no matter what SL Green does, and they do a lot, and they do a lot of good stuff, Wall Street just ain't having it. Will Krasne (13:45) These guys are so smart. They're so good. They are the most sharp elbowed, the most creative. They've made so much money doing so many different interesting things from building the alpha development in this last cycle of one banner built, which has been phenomenally successful, vulture credit deals, out elbowing Ben Ashkenazi for ground leases, all of these things. And it has meant jack fucking shit for the stock price. Hiten Samtani (14:10) Stocks down twenty-three percent over the past year and forty two percent over the past five years. Will Krasne (14:14) fifty four percent over the last ten years. Wow. And the market cap is three point seven billion dollars. Hiten Samtani (14:19) The entire market cap of SL Green is a billion dollars less than the valuation of one Vanderbilt. Will Krasne (14:26) That's not the equity value there, but still pretty meaningful data point. Let's go back and figure out how we got here. There were a lot of office investors who put together Class B portfolios over the years, but there's only a couple that I would say are on the par of SL Green. So SL Green, Bornado, and then a couple of the families, but even those aren't at the scale and sophistication of these two. Hiten Samtani (14:52) I would put these guys in a class of their own, but let's talk about it. So squash champion Stephen L. Green has amassed a portfolio of largely class B buildings, most importantly in the Grand Central submarket, which has always been the alpha office market. Will Krasne (15:11) Don Draper gets off the train from Austin and that's that's where he goes. Hiten Samtani (15:15) So in nineteen ninety-eight, there's a shift, and we talk about the shift a lot at the promote, right? The shift from the cowboys, people who kind of cobble together these portfolios by sheer will and just going balls out. Yeah into an institutional thing. So from the cowboys to the suits. In nineteen ninety-six, Steve Roth over at Vornado had hired Mike Fasatelli from Goldman Sachs, and that had been seen as the turning point of that company. In nineteen ninety-eight, Stephen L. Green pulled his own card and he hired Two lads from a company called Grammarcy Capital. One was Marc Holiday, who is the current CEO of SL Green. And the second was his deputy, Andrew Matthias. These guys essentially set SL Green up on the path that it is today, this behemoth machine institutional blah, blah, blah. The company went public and is now a re. Holiday was talking to me about creating the bones of what became SL Green Realty. And he used to go to the Royalton Hotel with Stephen L. Green, and they would. Sit there and Holiday said, All I ever had on me at the time was my Wall Street Journal and a pen. We'd pencil out the business plan and adapt it week to week. Will Krasne (16:16) Important note though is the guys such as Stephen L. Green, Larry Silverstein, who put together these portfolios with willpower, a little bit of equity, tons of debt, personal guarantees, and chutzpah, they were sort of ramshackle. There's the story in Power Ground Zero where Larry Silverstein didn't get their bid in on time for the World Trade Center because their fax machine didn't work. Why the There is no paper jam. I swear to God, piece of shit. These guys Hiten Samtani (16:39) Pepper Jam. Will Krasne (16:45) Holiday and Matthias and Mike Fastelity, they are really the guys who turn these from ramshackle. And I say that like in an enaring way. ⁓ In behemoth isn't even really the right word. We talk a lot about how institutional private equity is just a widget maker. And they're sort of being turned into widget makers, albeit a very creative and sophisticated widget maker. But that's really what they're doing. And they're no longer buying and renovating lipstick Class B buildings, trying to make a spread to the yield. They're doing Hiten Samtani (16:54) affectionate way for sure. Will Krasne (17:15) Hugely complicated developments, really sophisticated credit types of things, or building condos or high end multifamily, but really getting away from the roots of value add office. Hiten Samtani (17:25) Holiday and Matthias brought to the table was the structured finance capability. So, for example, the Sony building in 550 Madison was in play. SL Green tried to buy it. They lost out to the Garthy lads the Chatreats. Yeah. But immediately they went to the Chatreats. Robert Ivanhoe talks about this. He's like, I was cornered at the Revenue ball. We've got the financing sorted. So they arranged a 900 million-ish package. for the treats on this and then they kept the mes on it. So they've always been able to figure out a way into the deals that they want, even if they don't win them. That's been in their DNA now for the last fifteen years or so. Will Krasne (17:57) They're really early to it because everyone in their mom now wants to do pref, mes, hybrid. And they've been doing this for a long time. A lot of lenders try to say, we're really not loan to own. If you listen to certain guys who you can guess who I'm referring to, we're friendly. We're you really don't want to own it, but we have the capability, of course, and we have to. And SL Green is just, we want to own it. You wanna close? Well, we wanna own it. So pay us back. And It's worked out really well, both in some cases where they've taken over and been able to add extraordinary value, or where I think they recently made a massive win buying distressed debt at a huge discount just because they were able to deliver the bag of cash the next day. Hiten Samtani (18:34) Let's talk about a couple of big wins they've had. So five twenty two fifth, which is the RFR building, they got into the debt stack there. The way one source memorably described it to me was Credit Suisse wanted their money in unmarked bills tomorrow. Will Krasne (18:49) That's thing about real estate that sometimes people want money and unmarked bills tomorrow and SL Green, one, had the capital to do it and two, could do it quickly enough. This is a big thing, is that the opportunities are there and they're there for a very fleeting moment. And a lot of people are gonna wanna go to a committee and or go to their co investors or what have you and these guys in. It's done. Hiten Samtani (19:13) These guys have the mandate to move, yeah. They step in, they pay sixty cents on the dollar. You don't know what's gonna happen with this building, but somehow RFR finds what I like to call the one of one buyer. Amazon comes in, pays them three hundred and fifty million, like way above market for the tower, and Estel Green gets paid in full. You can do the IRR on this, Will, but they made ninety million on a hundred and thirty million dollar investment in months. Pretty pretty good. Will Krasne (19:37) Here's the whole crux, though, I think of this issue is that had they done that with somebody else's money, that is infinitely more valuable than doing it with your own. And I think that's really the original sin of this whole thing. Let's look at related and let's look at SL Green, because they're two sort of different things. Related, almost much more purely development, privately held. They also have the huge portfolio of affordable housing, which now is throwing off geysers of cash. But look at the Enterprise value related versus the rent enterprise value of SL Green. What SL Green does is just as hard. They've delivered probably just as good returns, if not better, on the asset level as related, but they're doing it with their own capital, with their own balance sheet. And they're by nature constricted. Whereas related is laying off all the risk. They are doing the most profitable portion of development, which is buying the land, taking that risk themselves, selling it at a markup or recapping it at a markup. And then getting fees coming in on huge amounts of capital for these large projects. Whereas SL Green isn't. Your dollars go way further if you have somebody else's money coming in. Hiten Samtani (20:38) And this is obviously they're constricted by the structure they're in by being a real estate investment trust. Will Krasne (20:42) really a real estate hedge fund. And being a REIT, I think has really hurt them. And had they just been a privately held concern doing the same amount of deals, the enterprise value of SL Green itself would be much higher. Hiten Samtani (20:54) They're sniping these cap stacks. There's not that many things trading, but there's a lot of action happening in the depths of the cap stack. And SL Green's right in there. 63 Madison Avenue, which was Jamestown and George Comfort. Wells Fargo and a consortium of lenders own the debt. SL Green has now stepped in, bought up a lot of the consortium, not Wells Fargo yet, though apparently they're trying to do that too. And they're buying it at a heavy discount and they expect to get paid at par. And if they don't get paid at par, they can squeeze. And that's what they do. just before we got on here, published a piece about the Helmsley building, which is one of the icons of the Manhattan skyline, is now officially on the market. Yeah. It's being billed as RXR is marketing it, but that's all nonsense. The lender is pushing for the sale. SL Green also has a special servicer division called Green Loan Services. I was told it's the largest CMBS SASB special servicer in the country. wow. And it kind of came out of nowhere. Yeah. Pretty crazy. Will Krasne (21:48) I mean, i where is that embedded in the stock price? Look at the value for a Starwood Capital having L and R. That is hugely valuable. Hiten Samtani (21:55) This is part of it. ⁓ someone familiar with the company was describing it to me as they sold an asset on fifty third street at like a hundred million dollar markup home run deal. And that very day the stock was down. It just doesn't seem to matter. There's three things I want to get into the Times Square casino, the people in SL Green, and then the existential nature of what they should be doing. Which one do you want to go with? Will Krasne (22:20) Well let's go to the people first. The stock has struggled, like that's just an objective fact. Yeah. And they've really tried to rearrange the talent. Folks have moved in, folks have moved out in an effort to reframe the company. Some of these big names have left and are doing other things, most notably Andrew Matthias. Hiten Samtani (22:35) Andrew Matthias left in 2023. Matthias is related's co-GP on 625 Madison. Ashkenazi bought the ground, SL Green smacked him around by buying the debt, booted him out, and then sold it to Related. And now Matthias, who was very much involved in those machinations for SL Green, is now a co-GP with Related on the tippy top office tower it's gonna become prior to him. Will Krasne (22:56) Amazing. Good for him. Hiten Samtani (22:58) the co-CIOs Isaac Zion and David Schaunbronn left. With every departure, there's also been an ascension. There's a cult in the mix. Harry Sidemer has become the guy at the company. So he has both the title. He's president and CIO. It seems like he has an unlimited level of juice as well. Will Krasne (23:16) Littlefinger said, Chaos is a ladder. And this guy is not even 40 and already the president. 35. my God. Yeah. Yeah. I gotta wear more moisturizer. Honestly, not unlike what happened with Marc Holiday and Stephen L. Green. I think they're reframing the company. They're trying to really be credit forward because we're the golden age of private credit, or probably just a little bit past the golden age of private credit, given what's happened recently. But Hiten Samtani (23:23) Thirty five Will Krasne (23:42) There's sort of this existential issue with being a read. It's the original sin. And we've seen it with other companies try to convert to a C Corp. Hiten Samtani (23:49) We've talked about this on multifamilies. There's been so much absorption and dissolution of multifamily in the last eighteen months or so. Will Krasne (23:56) It's also the same thing that happened initially with Blackstone, KKR, all those firms, because they were partnerships for a long time after they went public and then they had to do C Corp conversions and that's really what fueled the stock price. I think the same thing's going through here. If I were them, I would really try to be considering how to not be a REIT and to be an alternative asset manager. Hiten Samtani (24:15) You're forgetting an important point though, Will. REITs are generally very lucrative for the people running them. Marc Holliday compensation has been an interesting source of drama over the years. He got a $17 million compensation package, despite an investor advisory firm describing it as quote, excessive in light of the developer's disappointing stock performance. And there's a lot of discretion that a lot of these REIT executives seem to have in how things work out. Marc's slice of the carry on SL Green's new debt fund, did you know, was 12%? Will Krasne (24:20) This is true. Hiten Samtani (24:45) Woof. Pretty good. Pretty good. You can also personally direct thirty three percent of the carry to other SL Green employees. So that's just a lot of influence and power. Will Krasne (24:54) Sure, it's not gonna go to Hark Moliday. Speaking of power, the one that really stuck out to me is what happened with Juan Vanderbilt. I think he invested $1.4 million and got personally and got one and a half percent of the profits interest in it. And then half of his interest of that 1.4 got bought out at stabilization for $17 million or something insane. There's all these little nuggets left and right throughout this thing. Hiten Samtani (24:56) Yeah. Put Harry Sidemer's compensation into Claude and I asked it to do a base case scenario or midpoint scenario and a moonshot scenario. And we had year one total of six point four million on the base case going up all the way to nineteen million dollars. So it can be pretty good if they hit all their targets, whatever those targets are. Will Krasne (25:37) They're restriping their options, it's one thing, but if they're stock price targets, that's been a little bit of a challenge recently. Hiten Samtani (25:42) I and then obviously there's been one significant black eye over the last few years, which is the casino bid. Will Krasne (25:47) Even guys with the most juice and the most expertise can't always get it. And we've talked about this previously, but it's one of the I Run. Yeah, it just so good. And speaks to, again, the difficulty of being in New York. This would not matter if you're an alternative asset manager. We've just talked about it, Brookfield losing all their money in DC. This wouldn't matter, but it just feeds the narrative that New York's a really hard place to do business. And if that's your sole place of doing business, it's difficult if you're using your own balance sheet. Hiten Samtani (25:54) Go running hot. You know holiday was set to get a ten million dollar bonus if they land at the casino? It was like a one time I did know. Will Krasne (26:21) He probably had a couple of ⁓ yearlings picked out that he wanted to buy there. One of the alpha guys in New York. But really game selection and market selection is almost more important than individual deal selection. These are really smart guys. They've obviously thought this through. And it wouldn't shock me if they make a conversion to not being a Reet in the next couple of years, just because this is where the world's going. These guys are so good at the deals. But unfortunately, if you're a Reet, the deals don't necessarily matter. Hiten Samtani (26:48) They're not only good at the deals, they're also good at the other part of it, which is such an important part of it, which is the capital relationships that they have. They they sold a stake in one Vanderbilt multiple times to Maury building company, most recently at a 2,700 a foot valuation, which is a beautiful thing. They're partners with the Koreans, the National Pension Service. They've built out an incredible global operation. So yeah, in a different avatar, they could come out and really make it work. Will Krasne (27:13) They could, and again, this is all for a company with a market cap that's less than the employee commit to Blackstone's latest funds. Hiten Samtani (27:31) So, Will, you violate any debt covenants recently? Will Krasne (27:35) So funny you should ask. I have been in technical default recently. I mean who among us? Right. But not since Q4. Ooh. And that's not because I paid off a loan. It's because that's when I started using loan boss. Hiten Samtani (27:47) I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that. Will Krasne (27:53) Total waste of time, risky business to boot. Loan Boss runs the entire process for me. One click covenant testing, incredible. Instant cash flow forecasting, impeccable. And my favorite nerdy delight, the live forward curve. So I hate having to go download the forward curve and then it's always vertical. And you gotta alt HVT to have it go horizontal, make sure the index match works, like ridiculous. Hiten Samtani (28:17) They just got it sorted here for Will Krasne (28:18) For you. Much better. So thank you, Loan Boss. Hiten Samtani (28:21) Listeners, check them out at loanboss.com, that's loanboss.com, and tell them the promote sent you. Will Krasne (28:34) So the Mania in Albania, this is for my elder millennials. If you remember from the movie Little Giants, the O'Shea brothers have the Giants versus the Cowboys. It's called Mania in Albania. That was the genesis for this. Just a little snippet for everybody out there. Hiten Samtani (28:48) Will find joy in little moments like that. I do. I don't begrudge him. So Jared Kushner's investment firm, Affinity Partners of Will Krasne (28:52) So what are we talking about here? Call it like g Grift LLC. Hiten Samtani (29:00) Jared Kushner is out there planning a five billion dollar resort in Albania, a beautiful spot of the Adriatic Sea, and he's going in and trying to build a luxury resort. Will Krasne (29:11) He's trying to do several, actually. There's a couple of different developments here in Albania. Who doesn't love going to the Balkans? Cezanne wants to build a luxury hotel and villas. It's an island in the south that was a secret military base for submarines. That's what I think when I when I think of, you know, a Belmont hotel. Hiten Samtani (29:12) Actually there's a couple in there. They're already doing some myth making around it. So Ivan Katr, she said, We were on a friend's boat and we stopped for a swim. And effectively that's how we found it. Will Krasne (29:38) really? That's how you found it. Not just like the gigantic alleged kick Get the fuck out of here, Vaga Trump. Jesus Senra, you should be ashamed of your Hiten Samtani (29:46) It's all nonsense. There's no shame gene in that guy. Anyway, so part of this is more broadly, since Trump has been in office, Jared Kushner, who has no official role in the White House, right? At least this time around, has been able to use his tremendous influence with the First Family to gin up a lot of interest in his investments. He's been able to raise money from the Saudis, from the Patris, from the Amoratis. He's had a lot of success raising money for these nebulous vehicles. Will Krasne (30:16) Riddle me this here, Hatend. What do all those people have in common? It's really emblematic of what real estate has turned into in a lot of cases, because we've talked about how foreign capital is leaving the United States because of the political, not even instability, but just the machinations. It's hard to figure out what regulations are gonna happen. And so I guess if the mountain isn't coming to Mohammed anymore and the US roads it, Mohammed has to go to the mountain. Well done. Hiten Samtani (30:42) Mm-hmm. Will Krasne (30:45) It's been really, really controversial, particularly in Albania. Hiten Samtani (30:49) Backlash is that there was no public input into this project. It's supposed to be public land. And the Albanian prime minister is like, no, we need to open this up to broader international investment to make our economy thrive, et cetera. But it seems like the Kushners kind of got in there, did this thing behind the scenes, and now it's happening and people aren't very happy about it. Will Krasne (31:09) These things have happened in the dark of night. No one really knows why they got approved. The government, which is supposed to be keeping these natural preserves, there's migratory birds that are gonna be impacted. And I'm kind of kidding about that, but that's a real thing. The flamingos, where are they gonna go? Can you imagine if in Normandy, Omaha Beach turns into a four seasons? Like it's kind of ridiculous. We're seeing this all over where in the US land preservation has been a huge thing. It not just in NIMBYism, but even in areas Like central Pennsylvania, for instance, where a lot of local farms are being deed restricted to avoid development. We've seen it in USO data center development, taking over stretches of Virginia, Texas, the Northwest, where folks are like, we do not want this here. It's impacting the environment, it's impacting their electricity bills. And this is sort of the Albanian equivalent of it. And everything can't get out of the way of big commerce. Hiten Samtani (32:00) Part of it is the mixture between statecraft and commerce, which is such a fixture of so many other countries, has become so explicit in the US. And now they're exporting that relationship-driven business to other parts of the world. The American developers who are in, who have political juice, obviously the Kushners right at the top of that table, are able to go and make such questionable deals happen. One nugget here that I thought was interesting. The point person for the Kushners on these Albanian projects. is a familiar name if you're from the OG Brooklyn real estate investment landscape. Asher Abacera, he's the chief executive of LiveWork, and he put together that now very disastrous Dumbo Heights deal for Kushner back. Will Krasne (32:40) I was gonna say they were so successful in Brooklyn, like we gotta go to Albania and take this show on. Hiten Samtani (32:46) the road. You know how much I think about these things, but I remember Asher was kind of a nobody. Or two trees executive. The Dumbo Heights deal happens. I go to the holiday party circuit the following year, super Persian guy in the center of the room and like people are coming at him. It's just the power had changed so much 'cause he was in the Kushner or Will Krasne (33:02) talk about what type of epoch are we in and I think this story is about as emblematic of it as it gets. Hiten Samtani (33:14) Okay, I'm here with Aaron Krowitz from Bravo Capital. Aaron, you've done two and a half billion dollars or so of deals so far. How are you thinking about scale going forward? Will Krasne (33:22) There's a divergence between optimizing for scale and optimizing for quality. And when you're running a debt fund, you have to pick. You have to say, Am I really fee-driven and do I want to maximize how much I could put out? And the other business model is what we've chosen is slow and steady. Do we want the reputation to proceed ourselves? Investor returns, that's more important for us than volume. If you look at some of the REITs, they were forced to deploy in the realm of two to eight billion a month. First They AUM gobbled, right, as your sweatshirt says, but then they were forced to like regurgitate that AUM more rapidly than they really could. And it forced them to pick terrible deals. Their returns are negative to just go for scale, for scale's sake. That's a short-lived business model. Hiten Samtani (34:11) Thank you, Aaron, and where can people find you? Will Krasne (34:13) People could find us at BravoCapital.com. Hiten Samtani (34:21) So there's been a run on institutional capital buying not just retail assets, but the operators behind them and this T P G deal is emblematic of all that. Will Krasne (34:30) Right, a big consortium of TBG, Nordison, Likais buying Echo Realty. It's a big operator, more than two hundred and thirty retail centers, mostly Midwest, Southeast. What's interesting isn't they're not just buying the assets, they're buying the op company. There's been a handful of these types of deals in the last six months alone. We've seen Town Lane buy shop one, not just the assets, but the whole platform. Hiten Samtani (34:43) The One did a massive deal a be about a year or so ago, right, with RoIC, was it? Will Krasne (34:55) They took that private, but yes. And then MCB bought Epic again, same thing. They bought not only the assets but also the platform. Bain Capital formed a new platform with eleven North partners. They raised a billion six to get to a bunch of assets. What's interesting is real estate, what you're able to raise for always shifts, right? Yeah. And if you're the big platforms, mCB is sort of the outlier here, but they've been phenomenally successful in raising capital and broadening their base outside of a fund series. What's really able to get raised for now is sharpshooters. operations acumen on the asset level. And I think the clearest way to demonstrate that is through buying an operator. If you talk to Town Lane, if you talk to MCB, if you talk to Maine Capital, what they'll say is that, yeah, these guys were excellent operators, great leasing, forming capital, capital allocation, debt capital markets, that's where they struggle. That's where we can come in fusing boots on the ground, leasing operations, property management with institutional asset management. debt capital markets, capital allocation, investment decision. Hiten Samtani (35:57) So it's TPG, mega asset manager. You've got Norgis, which is the Norwegian sovereign fund, which has taken quite a bath in office. And then we've got Lakkais, which rose out of the ashes of Ivanhoe, Cambridge, and OTERA. They're now have moved from being a quote investor operator to pure investor. So they were just putting the money and shutting up. That seems to be what's happening. You've also got PSP, Canadian Pension Fund, which has also had its struggles in office. Will Krasne (36:22) So they're shifting over to grocery anchored retail, which is one of the hotter asset classes right now. We talk about data center, digital, industrial, but grocery anchored has really had a moment because we saw Amazon take care of all the retail. That was a real bloodbath, similar to Office, but grocery anchored is doing phenomenally well. And really, the sales per foot in some of these asset classes have never been higher. It's really got to be with the grocery to drive traffic to the other inline stores. And they've been really Really strong performers over the last five years. You can be a great property manager and a shitty asset manager. And if you can fuse those two things together and have them all talk to each other, that's really the best strategy. And you pair it with most importantly the ability to go get debt. Cause you look at a TPG, lever up and do things that you can't do if you're just a company that doesn't have that type of balance sheet. Hiten Samtani (37:06) They can lever up. That's it for the promote podcast this week. New York's rating heavyweight REIT keeps getting ropodoped by Wall Street. The Cushers continue to combine statecraft and real estate deal making, this time in the crystalline waters of the Adriatic Sea. And the biggest institutional investors want a piece of your shopping cart. Will Krasne (37:39) I'm bringing it back to the leck. I can't get over it. I'm just so excited that we have to talk about leck. Hiten Samtani (37:43) You feel like a king when you have that currency, man. It's incre Will Krasne (37:46) It's like in Eurotrip when he's like, Can't get over that exchange rate and Bratislava. Thank you again also to all our sponsors who make all of this possible. Hiten Samtani (37:56) Loan Boss, the best in class CRE debt management software, you can find them at loanboss.com. Will Krasne (38:00) Bravo Capital, a leading HUD and Bridgelender that lives and breathes capstacks, they're at BravoCapital.com. Hiten Samtani (38:06) And Real Property Captive, the first group captive for mid-market GPs. You can find them at rpctive.com. I will see you next week. Will this is a fun one. This was a fun challenging one, but a fun one. Challenging one. Listen, listeners, you have no idea what we went through to get you this episode, so I hope you like it. Well, thank you so much. Thank you. See you next week. Ciao. Will Krasne (38:15) Ciao.