Latest / The Promote Podcast / Bluerock's Liquid Death, Soundstage Flops and OZK Walks the Plank

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Bluerock's Liquid Death, Soundstage Flops and OZK Walks the Plank · The Promote Podcast

• Hiten Samtani (00:03) If a tree falls in the forest and no one's around to hear it, does it make a sound? Will Krasne (00:07) It does, but fortunately it doesn't impact the NAB calc. Hiten Samtani (00:21) Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani Will Krasne (00:27) and I'm Will Krasne. Hiten Samtani (00:29) Today we talk illiquid death. The Blue Rock listing the bulkhole says so much about the mark to magic that's happening in the non-traded REIT market. Really bizarre opaque space that we're going to dive into. We then head to Hollywood where showbiz is turning into bad biz for Hackman Capital and others who went all in on sound stages. And finally, we head to Charm City to check in on Baltimore Peninsula. Mag is out, Hines is in, the Eastin Will Krasne (00:52) make shit in this country. Hiten Samtani (00:55) Indeed. Speaking of, our IP to James Ransone who gave us the iconic Ziggy Sobotka Will Krasne (01:00) Ugh, just tragic. Phenomenal in everything, how to make an America a generation kill. I am petting a duck in remembrance. Like I'm the only guy in South Balmer that ever tried to win the affections of the farm man. Also, noticed no one stepped up with my Hanukkah Hiten Samtani (01:17) What's up with that guys like will wills your guy come on? Will Krasne (01:20) We have a couple nights left, so let's go. Let's go write us some fresh reviews on Apple to bring this to unenlightened ears. Hiten Samtani (01:26) Also, check out the Promote Insider for our premium content. Our Hotel Insider went on a heater talking about the Sonder leases in our Insider only Wednesday edition. You can check it out at thepromote.com slash upgrade. Listeners, there's a 10 % code we've dropped in the show notes. Will Krasne (01:42) Fantastic, check it out. Hiten Samtani (01:44) You wanna do a little quick newsie nuggets up top? Will Krasne (01:49) Just a couple things that we've talked about before, want to touch on again. Number one, with a bullet in my view, Steve Ross gets the largest construction loan in Florida history for funsies, just like in his. Hiten Samtani (01:59) We'll drop that episode in the show notes as well. We did a whole episode about how Steve Ross is basically remaking West Palm Beach in his own image and he's untethered from any institutional constraints and it's really really fun to watch him operate at this level with all the connections and boom what is it 772 million here? Will Krasne (02:17) Yeah, unless you think that's like a portfolio loan, was two deals. Hiten Samtani (02:21) incredible guy. the height of chutzpah here from Albert Baylor, the CEO, wait, wait, wait, the ex CEO of Paramount Group. Did you see the last nugget that he was escorted out of his office? Will Krasne (02:34) not surprised there's an escort involved, but yes. Hiten Samtani (02:37) So Albert Baylor is his company, The REIT is being sold to Rhythm Capital for 1.6 billion. is a little, the little Rhythm Capital. This is about 12 million, 13 million square feet of office in New York and SF. And the reason it got so interesting is Albert Baylor had multiple Nepo baby situations happening at the company. The conflicts of interest were so concerning that the SEC got involved. Anyway, Rhythm Capital came in. Will Krasne (02:46) Rhythm Capital. Hiten Samtani (03:05) bought the company, the stock has been in the toilet forever, but now Baylor wants to get paid out. What's he looking for here? Will Krasne (03:11) He's looking for one tenth of a Zazlev, I think. Hiten Samtani (03:15) which is, for those uninitiated, $34 million golden parachute and shareholders said, absolutely not, get the fuck out of here. Will Krasne (03:23) Well, the best part is that that's all performative and they're still basically saying go fuck yourself. Like, even though it doesn't matter, like, here's how much we hate you. This performative vote that isn't binding, we're still gonna overwhelmingly vote against you. Hiten Samtani (03:38) Let's dive right into it, man. This is one of those stories that is broken out of our CRE bubble and then I think into mainstream financial discourse, but I think it's still worth really talking about. Blue Rock. Will Krasne (03:49) of all kids. am liquid. Blue Rock just listed a closed end fund on the public markets and it traded at a 40 % discount to NAV within two days. wiped out years of gains. This is a great example. Part of the reason why it's think gone broken out of the little CRE bubble is volatility laundering has been a huge concern. Hiten Samtani (04:11) for those uninitiated. You want to just say what that is? Will Krasne (04:14) What it is is if you have if you're trading the public markets, you have a daily marked market like yes That's what it's worth. You can say ⁓ we're undervalued. We're overvalued The number is the number and if you're in the private markets and you get to make up your own value And you get to do it once a quarter instead of every day You can basically say our value is a hundred a hundred a hundred a hundred and then Meanwhile the assets if you were to trade them actually are like 70. Yeah, and this is in private credit Hiten Samtani (04:23) Whatever the Will Krasne (04:44) where companies will be defaulting and people will be marking the loans at par. Or the loans are trading at like 92 cents a month before they blew up. And it happens a lot in real estate, for private REITs, which we've seen quite a bit, where private REITs were in 2022 and 2023 were down 5%. And the public comps were down 30. you're like, wow, gosh, we just own 25 % better assets. Hiten Samtani (05:08) This is an argument that's been made by many of the biggest players in the space. So Starwood, Blackstone, Brookfield famously with the retail portfolio, the GGP portfolio, they did some kind of shenanigans there, even though malls all over the country were getting wiped. Brookfield's remarkably resilient retail portfolio kept its value. And they use the, they don't even, I mean, they're the final boss of this stuff, right? Cause they've got the Canadian accounting system that they can throw in there. ⁓ Will Krasne (05:28) Exactly. Yeah, whatever faz be I first yeah, what's Matthew McConaughey and wolf wall streets? So blue rocks got these assets they're saying they're worth X and they go into the public markets This was called the blue rock total income plus real estate fund because the plug That's what the the extra return is is this plus? Hiten Samtani (05:43) as he is a w- Sounds pretty pristine. Will Krasne (06:02) So it's effectively a fund of funds. it invests in other managers' funds. But what happened is, starting in 2022, this portfolio from Blue Rock, basically, they had 5 % of the fund could be redeemed in any given quarter. In every single quarter since December of 22, more than 5 % of the shareholders have tried to redeem. And so you think about, if you're a fund, what do you tap first when you have to sell something? You sell your most liquid things, which, make sense but then the end result is you end up with an increasingly less liquid business moving forward. There's some stat that like 30 % of what they owned was like completely liquid never traded up from like 5 or 8 % or something when they initially started because they kept getting redeemed. Hiten Samtani (06:49) You what it reminds me of? Did you ever have those Mercy or Quality Street chocolate boxes and you keep taking the good ones? then eventually you're left with just a fucking- Will Krasne (06:58) It's like in The Simpsons. Homer goes to the freezer to get the three flavored ice cream and he flips through like thousand cases and all the chocolate's gone and all of them. ⁓ That's exactly what happened. And the other part is people buy these things because they pay good dividends. And so if you cut the dividend, then you have to mark NAV down because that's obviously like a bright red flag. So what you do is you lever up. So you've got more liquidity, higher debt. So they kept paying these dividends and then the investors voted for this thing to go public. Like that's the crazy part. Hiten Samtani (07:28) Sometimes you want to shine a light and you want to see what's out there. Will Krasne (07:31) Sunlight is the best disinfectant. So they vote to go public and wipe out years of gains because the market effectively says, here's where we think your portfolio is valued. And if he is, it's a wazzie, he's a wuzzie. Hiten Samtani (07:43) This is important because this is something that a lot of the bigger names in the industry are facing. Things specifically of Starwood with SREIT, they had a flood of redemption requests too, I want to say year and a half ago. BREIT, Blackstone's vehicle, its flagship non-traded REIT has been dealing with this for a very long time. There was a flood of redemption requests. I think they have now got the situation under control, but this was like a year of back and forth with the markets. Famously, Nadeem Meghji, who's now no longer co-head of real estate, which is head of real estate. was on his honeymoon in New Zealand and he had to work on this rescue-pref deal with the University of California. Will Krasne (08:17) I remember being a very good piece of paper for the University of California to like backstop. Yes. The whole apparatus. But again, it's this fundamental disconnect between assets that have duration and then daily liquidity in the market. And I think that there's a few big takeaways here. It's really hard for private market assets to provide daily liquidity. Like you can't go sell something tomorrow in real estate. It takes you best case 60 days, more likely like four months. And in private credit saying. Hiten Samtani (08:45) the lead time. Will Krasne (08:46) There's a lead time and there's also friction too like the sales costs and transaction costs on these things are not immaterial Yeah, he's not and you've got transfer taxes You've got all of these different things that eat into the NAV So the things worth 40 million bucks, but lop 2 % off the top for paying Spies and well He's getting not getting out of bed for 40 million dollar deal. No pain Berkadia and Transfer tax title all that stuff it eats into it Hiten Samtani (08:51) Adam Spies ain't cheap man. Will Krasne (09:13) So it's really, really hard. And so you've got this volatility laundering and you may say it's worth X, but you get to decide yourself what the values are. And then you get Alvarez and Marshall or Dun & Bradstreet to just like rubber stamp. Hiten Samtani (09:27) One of these days we got to do a special episode on just this entire universe of enablers, and I don't mean that necessarily in a bad way, but sometimes in a bad way. The appraisers, the valuation experts, all of them who kind of give you permission to get away with some interesting stuff. Will Krasne (09:42) Private market investing really is, I'm saying this as a private market investor, it's... Hiten Samtani (09:47) for artists. Will Krasne (09:49) You can't just go put a formula in and say here's what all the comps are multifamily North Dallas Maybe it's the same thing, but you got different floor plans. You got there's all these different qualitative factors Hiten Samtani (09:58) Everyone believes all their real estate is the most unique real estate there is. Will Krasne (10:02) Right. Absolutely. Yeah, everyone's baby is the cutest. Except it's mine. Hiten Samtani (10:06) Nah, I don't know. You got competition there. A lot of non-traded funds have stayed private for the longest time because they feel the public markets don't really give them a fair shake. And I guess there's a good reason to stay private if you're going to end up in situations like this. Will Krasne (10:20) Well, it's expensive to be public and the scale you need to make it worthwhile is large. The market can be whatever Buffett quote you want to insert here. It's a weighing machine, not a voting machine. Blah, blah. Like that's, yeah, it's fair enough. They're not wrong because if you go to sell a really clean multi-deal on a good market right now, the cap rate has a four in front of it. Whereas look at the implied cap rates for NAA, UDR and all the public rates and they're much higher than that. Hiten Samtani (10:30) Swimming tides blah blah blah. Yeah And then the public-read bosses always cry about how their stuff is just not getting a fair shake. This is the standard refrain for pretty much every public-read that we care about, is the bosses are upset about how they're valued. Will Krasne (10:58) What they should do is sell all your properties and liquidate. The other part about having real estate in the public markets like this is that real estate doesn't generate that much cash. Think of it this way. The cap rate is the inverse of the P E multiple. So definitionally, like it doesn't generate nearly as much cash. You're buying things at a 5 % cap rate versus buying something at like eight times earnings, which is 12 and a half percent cash yield. Hiten Samtani (11:20) this is sort of the corollary to your favorite mantra. Every single real estate guy. Will Krasne (11:25) has way less cash than you think. Hiten Samtani (11:43) This is a story that has been quite evident for a while. If you look at the activity in Los Angeles where I spent a lot of time, there ain't much of it. you have to kind of think, okay, what is the end point of this? And for our real estate world, the end point is sound stages. It was such a massive thesis driven bet, right? In the pandemic, this whole thing was, well, content is king and that needs space. And we're going to invest an incredible amount of money in these sound stages. Blackstone came in, PE money flooded in, public reads came after it. It's been a bit of a journey. Will Krasne (12:19) It's been little bit dicey, I think. So Hackman Capital Partners, one of the largest owners of these asset classes in the US, rolled up 60 plus of them, raised a huge amount of money, I think from among others, the artist formerly known as Square Mile, Phineas. Hiten Samtani (12:20) So what's going on with Hackman? which is the artist formerly known as USA Real Estate as well. Will Krasne (12:36) and they have six enormous facilities in LA. They've really struggled because Hollywood has been in a contraction, sort of the opposite of what we thought with everything going to streaming, content is king. Hiten Samtani (12:47) When I was at the Real Deal, we had a cover story back in, I want to say in 2019, it was called Netflix and Phil, because it was all about this. It was all about this giant space goblin by Netflix and other streamers, right? The whole idea was they're all coming in, they're so well capitalized, with so much money to spend on content, you're going to need dedicated spaces for them. What is a soundstage? A very simple, basic thing that we should set up for the audience. Will Krasne (13:12) a place where a production studio will film content. So if you're filming Friends, it's filled in on a soundstage. Any show with a recurring office is basically filmed on a soundstage. And you want to do this because you build it once. You don't have to keep building sets over and over and over again. Hiten Samtani (13:30) New York has been making a giant push into sound stages. Will Krasne (13:33) Yeah, New York's got a bunch of tin cup studios. Silver Cup, sorry, tin cup is the golfer. Silver Cup studios. There's a big one in Greenpoint. Our boy Max Chan used to be the line lord. Hiten Samtani (13:44) Shout out to Max Chen. Will Krasne (13:46) And obviously Los Angeles had a ton of these as well Hiten Samtani (13:49) It's been a triple quadruple whammy, Hollywood strikes, fires, merger activity. Will Krasne (13:55) it's much cheaper to film these things elsewhere. Like Rob Lowe said that he was filming some game show. That guy works so much. I mean, richer than creases. And he said it was cheaper to go produce this game show in Ireland than it was to do in LA. And everyone was in LA. That just talks about how expensive it is to film there. Hiten Samtani (14:01) Okay, I just closed it. Sanjul doesn't do itself many favors. It has the entire infrastructure. It has the history. has everything set up for it. But I think it's so cost prohibitive to be here that people are just now looking elsewhere. Quality content is now much more portable than it used to be. It's less of a one of one place. It's still the place, but it's less of a one of one place than it used to be. Will Krasne (14:33) I need to put some numbers to it. I think there's a stat in this article in the Wall Street Journal about Hackman. The production of film and TV programming in 2024 that cost over $40 million per pop, not per episode, but like per production, was down 30 % from 2024 to 2022. Hiten Samtani (14:49) What ends up happening at the sponsor end is they have to restructure a bunch of their debt. Hackman is having these issues with their Goldman money, I think. Will Krasne (14:56) So they bought all of CBS Studios production space, which a rare win for Sherri Redstone. Good sale. And I think they paid $1.8 billion. Goldman has a $1.1 billion loan. Hackman didn't pay it off when it came due this past year. A bunch of it isn't flux because Netflix, I think, is one of largest tenants in the space. And Netflix is an exclusive discussion to buy Warner Brothers. Part of the reason why people... coveted Warner Brothers is that they own all their real estate. own all the Hiten Samtani (15:28) So they don't need Hackman, they don't need an HPP, etc. Will Krasne (15:31) Yeah, so whoever buys it, whether it's Paramount or whether it's Netflix, they're going to not lease as much space because they're just going to use this Warner infrastructure, which is just going to be devastating. Now I got to turn my back. Hiten Samtani (15:44) Speaking of HPP, Hudson Pacific Properties, a run by a guy called Victor Coleman, they're the ones who partnered with Blackstone. So Blackstone made it. What was it? Secular Tailwind Bet on HPP with sound stages. Will Krasne (15:54) Well, offices are 2 % of our portfolio and sound stages are only 50 tips. So Victor, Victor is a well compensated individual, wouldn't you say? Hiten Samtani (16:03) I would agree with that, so this is an incredible statistic. Victor Coleman's total comp in 2024 is $25 million. Do you want to take a shot at how well HPP did that year to make it commensurate? Will Krasne (16:16) I assume they did excellent. Must have done very well. Hiten Samtani (16:19) Yeah, they lost $364 million. Will Krasne (16:22) John Malone, the chair of this company. Hiten Samtani (16:24) So it's just a very, very tricky time for HPP as well. They suspended their dividend for a while. Then they went out back to the market to raise another $600 million in cash. Cohen and Steers jumped in and took about half of that. And what's interesting is like people aren't stopping now. This is a question for you, which is once you have these narratives in place, once you've raised a bunch of money around them, do you have to be Nero, the mad fiddler of Rome? Because television city, which is a billion dollar mixed use project is supposed to have 700,000 square feet of sound state. Will Krasne (16:54) I want to differentiate because I think the the imperative for someone like Hackman Capital Partners, which is private versus a public We traded company. I think they're different. So let's let's do that cut between that if you are a private fund manager The decision of whether to invest or not or whether to develop and not was made upstream of you Yes, your job is not to decide. Yes. We're doing this or no, we're not Hiten Samtani (17:15) Yours not to question why you're supposed to do and die. Will Krasne (17:18) You go do the best deal that you can. You're basically dollar cost averaging into whatever it is you've decided to do come hell or high water. And that's your job. Your job is not to decide, oh, it's a bad time. If you think it's a bad time, don't fundraise. If you're HPP, obviously the calculus is a little bit different because you have shareholders, you have to do the right thing at a given point, which may not be to develop. if the go-forward IRR on a project you're mid-development on is gone, you stop. Don't spend the bad money. The thing we haven't talked about is... Sora and AI. And how is that going to impact content? And what's that going to do to the need for sound stages? I don't think we're at a point where you can just say, write an episode of Hacks and just have there be conflict and have Deb and what's her name ⁓ be friends at the end. We're not there. But it's all going to be additive, right? Like a lot of post-production, it's the marginal thing that causes the damage, right? Because that's where you make all your money. Hiten Samtani (18:16) Chris Nolan might need the exact amount of space that Chris Nolan needed for Interstellar or whatever, right? But the multiple layers below him, the C-list, the B-list, etc., they're going to have to compromise, they're going to have to work with smaller budgets. And as a result, real estate is definitely going to be a casualty of that. Will Krasne (18:35) So deploying capital at scale in real estate really is about, as you said at the top of this, thesis-driven investing. You have to figure out something that's acceptable that allows you to pump a ton of capital into it. The problem is, is when that thesis is flawed, you end up in a situation like this. And I don't think the thesis was necessarily wrong, but just in an account for all of the risk down the road. didn't account for generative AI. Strikes. Didn't account for strikes. Risk is inherent in everything and you can't ever remove it, it's just transmuted. Hiten Samtani (19:05) As William Goldman said, nobody knows anything. ⁓ Will Krasne (19:09) Nobody knows anything. Hiten Samtani (19:27) The game is the game, Will Krasne (19:29) All the game, yo. The Baltimore Medical Project, the artist formerly known as Port Covington, now Baltimore Peninsula, going through another shakeup. Hiten Samtani (19:37) This is a big one. It brings up a bunch of dynamics that we should definitely talk about. Mag partners have been asset managing along with McFarland partner. Will Krasne (19:44) Yeah, so Victor McFarland and SF he's winding down the firm. Okay. It's one of the largest or a very large development firm they did a lot of PBPs and I guess he had this successor and then basically it was like this guy's not it and he's like I'm just winding the firm down. Hiten Samtani (19:48) Okay, let's see how You know what? Friggin' kudos to you, Victor. That's the way to fucking do it. Don't be Ali. Go out on top. Be Khabib. Send me a message. Like location. Location. So here what's happening is, Mag had been asset managing. Their contract ran out late last year and Hines is stepping in as kind of the adults in the room. This is a pretty interesting JV group here. It's Kevin Plank, who is the founder of Under Armour, and Goldman Sachs. Will Krasne (20:05) No, totally agree. Goldman Sachs Urban Infrastructure Partner. Yeah, so they were a huge part of this. Hiten Samtani (20:27) that's them. Okay. Can I say that they're not very good at investing or is that too much to say? No. They've had a lot of really messy Essex Crossing as them as well. Will Krasne (20:39) It's really hard and I think there's some of these themes in this project that are similar to Essex Crossing. So Kevin, who founded Under Armour, the Under Armour stock was through the roof in the early 2010s and he went nuts and was buying everything. He had the Sagamore Pendry Hotel in Baltimore. Hiten Samtani (20:58) He has a hold called Sagamore, ⁓ Will Krasne (21:02) He owns a horse farm which he's trying to sell dead sag more whiskey and the second more pendry I have to say one of those beautiful hotels are ever been in yeah, and probably never made a red cent ended up selling that He's been selling pretty much everything because unarmored stock is down 75 Hiten Samtani (21:16) 5 % over the last five years. Will Krasne (21:18) tough. As part of this transition, they are also giving back a big land parcel to Bank Ozk. Hiten Samtani (21:24) to Bank OZK and this will sound like deja vu because Bank OZK just did a take back seas in Chicago at Lincoln Yards as well, which we'll get to. Will Krasne (21:33) Another massive urban project in a declining population. Hiten Samtani (21:39) I gotta say, for Marriott, this would have been a pretty sweet gig, no? Like, pretty solid fees for a couple years? Will Krasne (21:44) Yeah, solid fees. You've got a narrative here that you can see, you squint a little bit and see how it makes sense. You had a extensively deep pocketed sponsor. Hiten Samtani (21:54) Maryann came in in 2022, and to keep the Hollywood theme going, she replaced another showrunner in Weller. This is going to be the at least the third manager coming in here. Will Krasne (22:03) Yeah, it's the third. I think there's been three rebrands during that time was Port Covington. They bid on Amazon HQ 2. Then it was like Cyber Town USA and then Baltimore Peninsula. The reason we want to talk about this is that there's a sort of theme of these massive urban redevelopment projects and that are sponsored by local guys with deep pockets. Yeah. And a lot of them are kind of debacles. Hiten Samtani (22:25) thing I think about a lot, right? You can kind of see why this takes shape. Very wealthy influential person wants to leave a physical legacy on the place they're from. They think, well, the best way to do that is do a freaking giant development. But again, as we've said before, development is hard. Will Krasne (22:41) It's really hard. And you might think if you have the money and you have the political juice, like those are two very critical elements. not all you. They got a massive tiff. So which was like hugely controversial that he got. Hiten Samtani (22:48) Which Planck has, he had that, right? Tax increment financing, correct? Yeah. feel like that's table stakes for some of these things, right? Centennial Yards is getting that. Our boys at One Beverly Hills actually got a special tax district, which is like a next level thing. You kind of have to get these city and state tax incentives to make anything like this pencil out. Hudson Yards obviously famously is the goat of the... Will Krasne (23:13) And I think there's also two other things you really need. The first is if it's a wealthy private guy doing this, his underlying business can't shit the bed. Hiten Samtani (23:21) You need the wealthy private guy to stay wealthy. Ideally get more wealthy over time. Will Krasne (23:25) And not even just that, I Under Armour initially was going to take something like half a million square feet of this development. Yeah, that just didn't happen. They're much smaller portion of it now. They've built 1.1 million square feet, a couple of apartment towers. There's a bunch of office space, is like half leased, some retail. But it was going to be an Under Armour development and the company has just not been able to do that. So that's one. And then two is you need the underlying value of the land to continue to compound during the development. Hiten Samtani (23:30) to anchor it, right, yeah. And we've talked about this with Starwood and their master plan community. That is the whole linchpin of the whole thing, right? The land value has to get, has to appreciate. Will Krasne (23:59) Yeah, exactly. if you have so much of this, this gets built out over so many years, like you need the land value to keep going up to just like make the math work. ideally, each development is... A creative... Textualized and helps the stuff that came before it and is additive over time. But if the land value goes nowhere or goes down, you just can't build these things. The whole way you make it work is your land is more valuable so you can borrow more against it over time. And that didn't happen here. Hiten Samtani (24:27) You can borrow more against it. can bring in a JV partner at a higher valuation. That's part of it too. Yeah. Will Krasne (24:33) That's, yeah, that's a very great point. Didn't have it at Lincoln Yards, didn't have it here. You also need to be super talented. It's hard to outsource these things. There's a reason that Steve Ross can do this out of his PA in West Palm. Hiten Samtani (24:44) One thing I want to say, the lender here again, Bank OZK, this is an interesting and probably worrying trend for the boys from the prairie who could. They took back that Northern Yards portion of the Chicago Mega Project, Lincoln Yards. They took that back from Starling Bay, formerly Cock of the Walk developer in Chicago. They've basically walked away from New York ground up for now. According to my sources, they were supposed to do the second phase of the Naftali project, the Williamsburg Wharf project. They were very much in the mix there. Will Krasne (25:10) ⁓ Williams Revolve, wow, yeah. Hiten Samtani (25:14) It's not like they pulled out last minute wasn't like the Landau thing that we've talked about before it wasn't anything like that, but they they basically Expressed that they don't want to do this anymore And so then naftali turned to his boys from a golden tree and JP Morgan, which are doing 800 fifth for him So it's the same lender group that just closed on the half a billion dollar loan for that Williamsburg The point is that Ozzy K is taking it's getting a little interesting there as well Will Krasne (25:39) Right, and OZK, they were so early post-GFC to come back into construction lending when it appeared really risky, no one wanted to touch it. They were one of the first people to come and open the spigot. Hiten Samtani (25:52) much money. think George Gleason was without exaggeration the most important man in real estate for maybe five years. George Gleason and maybe Nick Mastrani. Will Krasne (25:57) Yeah, he's certainly on the short list. But as we talked about before, so much of real estate is getting permission. And so if you have one crazy guy out there writing these loans, it allows everyone else to turn the spigot back on. And that's really what led to this development boom that led to so much of this past cycle. Hiten Samtani (26:15) OZK hasn't quite gone away. They just seem to have focused very, very heavily now on South Florida. That seems to be a market they believe in completely. And they're just putting all their billions into that as opposed to a lot of the other core markets that generally they would play in. Will Krasne (26:29) Also, I think what their chief investment officer or chief landing officer, I forget his name. Hiten Samtani (26:33) Dan Thomas? Yeah. Dan Thomas ran something called the Real Estate Strategies Group, RESG, and RESG was, RESG made things happen. Will Krasne (26:42) Yeah. So to bring it back to Baltimore, you've got this site where you have 1.1 million square feet. Great. Pretty big. Not very well leased, not great connectivity, not fully occupied. And the rest of that parcel, is it going to get built? Who knows? OZK took a big write down. Maybe Hines comes in and does it, but like at what basis you end up with something that's just ⁓ a blight instead of sort of a very transformative project for a city. Hiten Samtani (27:09) Baltimore, gentlemen, the guards will not save you. One point I want to make, mega projects are incredibly complicated because if you only have little pieces of them activated, it's not enough momentum to... Do you know where I'm going with this? it's... have one building here, you have one retail strip here. You kind of need a lot more than that to make everything sing. Will Krasne (27:30) need enough people to live there to service the retail. You need enough office to service the lunch places. You need enough retail to have people want to live there. All of these things have to talk to each other and all of them are important. And if you have one and not the other or not enough of any of them, the whole house of cards falls in on itself to pull another Baltimore thing out of our hat because of that film there and Kevin Spacey lived on a boat. Hiten Samtani (27:52) Let's see how if Hines can come in and kind of resurrect this, but right now it looks like the founder of Under Armour might just lose his shirt. Will Krasne (28:02) At least he's not gonna have sweat stains on it. Hiten Samtani (28:08) That's it for the Promote Podcast this week. If you keep marking to magic, you might end up hexed. Reshaping a city for anyone not named Steve Ross is harder than it looks, and sound stages have gone from investment darlings to boondoggles. But hey baby, that's just pictures. Will Krasne (28:25) We're still figuring out whether we're back next week. Hiten Samtani (28:27) Will didn't know this. He's sad about it. I don't think we're potting next week, Will Krasne (28:30) I might just, you might get a rambling thing from me again. We'll see if I can sneak it past the 10. But wanted to wish you all a Merry Christmas, Happy Hanukkah. And in case we don't see you until then, a very Happy New Year. This has been a privilege. We haven't even been doing this for a full year, but want to thank you guys again. We have a lot planned for 2026 and beyond, and look forward to giving you guys a lot of great content. Hiten Samtani (28:39) Merry Christmas! We started doing this when my son was three weeks old. The Mrs. gave me a hard time, but I just knew that we needed to do this. The CRE community needed something. And it's been such a privilege for us to have the audience that we do incredibly engaged, incredibly knowledgeable. I still remember the guy who gave us a whole spiel about Waltz. I think about him a lot. But in general, it's such a blessing to have an audience that is with you, that cares so much. It gives you lot of feedback and is a little bit also, I mean from the mailbag episode, a little bit nuts, which we appreciate. Will Krasne (29:23) I appreciate it because I am also nuts, so it fits. Hiten Samtani (29:27) Thank you all, really huge for us to have put this together and thank you Will. Will Krasne (29:32) Thank you, Hattenton. This is truly a pleasure. Hiten Samtani (29:34) Ciao!