Latest / The Promote Podcast / Ross takes his talents to [West Palm] Beach & Barnett Prefs Up

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Ross takes his talents to [West Palm] Beach & Barnett Prefs Up · The Promote Podcast

• Hiten Samtani (00:03) I want you to know, Mr. Mayor, that I am spending money in your city, like a drunken sailor. Now, you could say stuff like that in New York, it would be considered too gauche. But South Florida? Well, it's the land of gauche. And when a billionaire says that, you know that's quite a bit of money, West Palm Beach Mayor Keith James later gushed of the encounter. Now he was referring of course to Steve Ross, the goat of goats. Will Krasne (00:27) When it's a real estate billionaire, may not actually be that much cash to you. Ross is one of the only ones who might have it. For sure. We broke out several episodes ago how he grew from a little baby goat to the goat of goats. And now we're back to discuss how to paraphrase Jed Bartlett's favorite movie. He's now the goat in winter. Fight me and you'll Hiten Samtani (00:51) Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani. Will Krasne (00:57) and I'm Will Krasne. Hiten Samtani (00:59) This week, we're taking stock of all that Steve Ross has been up to since he said goodbye New York and went all in on West Palm Beach. It's been a whirlwind of big ticket deal making that combines real estate, education, sport, and glamour. There's so much to take away for the aspiring city shaper. Will Krasne (01:15) I love that you call it sport with no s. The pod is so continental. Hiten Samtani (01:20) Listen, I contain multitudes. We then look at Gary Barnett's billion dollar pref commitment for nine projects in various states of undress. And finally, the backlash to the backlash is here. The repeal of property tax freebie traveling HFCs is beginning to face some legal heat. Brands, by the way, we're CRE's water cooler. If you want to get in front of our audience of shock callers in this business, hit us up at partnerships at thepromote.com. That's partnerships at thepromote.com. Alright, well, let's travel south to the once sleepy enclave of West Palm Beach. Ross is running amok there, Will Krasne (01:58) Yeah, one time at the Saratoga racetrack, Mary Lou Whitney's husband, who recently died RIP, said that West Palm is like the gay 90s. Everyone's either gay or they're 90. So Steve Ross, city shaper in New York, like many oxygenarians, has moved down to the Sunshine State. Hiten Samtani (02:14) Generally at this age when people move south to Florida, it's basically to call time on a glittering career like Ross has had, but this is not that. Will Krasne (02:23) at all. Hiten Samtani (02:32) The New York company that Jeff Blough is now running the show, developer of Hudson Yards, biggest, most institutional developer in the country, let's say. Will Krasne (02:39) And it's one of the rare instances of these alternative investment firms that have had a very seamless pass the torch moment. Correct. Blau was the guy for a long time. He now runs it. Bruce Beale is very high up there too. And you know, when he's not now being a big LP in the Celtics and so Steve Ross, you know, what does a guy with $15 billion and pretty liquid to do? Well, he starts reshaping a new city and it's West Palm Beach. Hiten Samtani (03:05) And I love this because he didn't go to a city which already had a thriving real estate infrastructure and just build on that. He said, nah, it's a little more fun to almost create this out of whole cloth. West Palm Beach, there's a lot of wealth concentrated in that area, but it's more of a village in a sense. Will Krasne (03:22) It was, and it was a little bit sleepy. It wasn't hugely densely populated. It's not sort where you would think very wealthy people would immediately go. You're thinking Miami Beach, Palm Beach, Naples even. Hiten Samtani (03:35) There have been a couple of players here. There's the guy that TRD loves to call billionaire investor, Jeff Green. Doing a lot in West Family. Will Krasne (03:40) He's crazy. Well, it's funny you mentioned him because I was going to say later on, like he kind of tried to do this and hasn't really found much purchase. And it sort of shows like Jeff Green is incredibly wealthy and made a ton of money. Over successful. Steve Ross. Hiten Samtani (03:55) But he ain't Steve Ross. what is Steve Ross trying to do here? We're talking about a really, really ambitious even for this guy plan. Six million square feet of office, one and a half million square feet of condos, 700,000 odd square feet of retail, and nearly 900 keys across 70 acres. Pretty astonishing scale that he's looking at. Will Krasne (04:16) It's a project half the size of Hudson Yards in a city one eighth the size of New York. Hiten Samtani (04:21) The impact is a lot more magnified. And look, he's going, is he 80 something? And he told Bloomberg recently, said, this is the most fun I've ever had in my life. I love that Russ does these periodic interviews with the big publications in which he's generally standing with his hands on his hips and looking over some skyline that he's going to work. Will Krasne (04:39) with a purple shirt that just perfect for an 84 year old. But what also I think is very interesting here is that he famously at the top liquidated a big chunk of related via a convertible detonate to then buy the Dolphins. And then how is he funding all of this misadventure down in Florida? Hiten Samtani (05:00) Well, so the NFL recently in a landmark decision allowed for private equity ownership of sports teams, which basically opened the floodgates, made all these teams a lot, lot more valuable. You're f****g life's game of inches. So is football. So Ross recently sold a 10 % stake in his team to Aries. 8 billion ish. Will Krasne (05:11) Find out. He a huge valuation. Yeah. And he sold the formula one racetrack. There was a lot in there. He'd been talking to Ken Griffin at Citadel for a while about it. They couldn't agree on price, but he essentially probably took another billion dollars out and he's plowed it into West Palm office. Hiten Samtani (05:37) And why does it matter? Normally when we talk about big people doing big things, we'll say, yeah, he spent $500 million to buy XYZ. And generally they didn't actually spend the 500 million. They probably put in like 50 million of their own money. Will Krasne (05:49) And that 50 million is back-levered off of something else. Hiten Samtani (05:52) And Ross, glaring exception. This is all his equity. Absolutely crazy. Will Krasne (05:56) I remember someone told me that he started doing this while he was still at Related, like he bought the first buildings, was doing that. And I remember thinking, gosh, that's a little bit off the beaten track for Related. And the guy goes, yeah, dude, that's CXPA. Hiten Samtani (06:13) And you were not the only one who felt that way. There was some chatter at related HQ at the mothership that like, Hey, what is Steve doing here? And so he kind of decided to do it anyway on his own. Will Krasne (06:23) says it's the most fun you've ever had when you have no boss. You know, because even if you're Steve Ross, you're running related, like you've got a boss. It's your investors. no boss here. The quarterly investor updates are pretty short. Hey, am I kicking ass? Yes. Awesome. Hiten Samtani (06:38) They have been raising a ton of debt though, right? And so much of it has come from the aforementioned Aries. So Aries has given them, I was just trying to do the math here, $250 million refi for a luxury rental, 700 million construction loan in partnership with Monarch on two office buildings within that City Place complex. And then Aries also gave him another 200 million at some point for City Place. So it's about a billion dollars from one party. Will Krasne (07:04) Right. And when you think of the folks who can provide these types of loans, we've talked a lot about Apollo and the various origination machines they have. Last week, we talked about Garrison being spent on a fortress and Garrison's like kind of a little fortress. Yeah. And know, Ares, their DNA is from Apollo and they are another Greek god of credit. Hiten Samtani (07:21) Greek God with great hair, the way. Tony Restler, who is brother to CIM's Richard Restler, is betting on real estate in a big way by betting on Steve Ross. Will Krasne (07:31) Well, Tony, wrestler Mike Harghetti, one of the principal owners of the Baltimore Orioles credits in their DNA. Like this is what the company was founded to do. Now, doing it in real estate is on the newer side, but you've got a plus sponsor like Steve Ross going to default. know, like, no, I mean, he's absolutely not. It's chunky. You can put it out. And for Steve, I think what matters for him, I'm imagining he's like, I want clean execution super fast. I don't care if it's like sofa 200 versus sofa 190. I want it to be like very friendly docs and I'm sure that's sort of what this is. Hiten Samtani (08:07) And they have a relationship through the sports team and through other things they've done together, right? Will Krasne (08:10) Exactly. They gave him $800 million for his Formula One race to support the Dolphins, the Hard Rock, all that stuff too. So very intertwined. Hiten Samtani (08:19) Steve has been putting the seeds of this empire together for a long time, right? You get to this point in your career and you're not dead and you still have energy and you can tap all these relationships that you've been cultivating for decades. You can now tap them in really fun ways to shape the city, West Palm Beach. That's what I like about this. Will Krasne (08:37) This is not just, wow, what another great real estate project. Let's talk a little bit about all the other things that he's bringing here because West Palm didn't have like plug and play infrastructure for a, type of like global city that you're trying to make here. Like, what has he done? Hiten Samtani (08:52) Yeah, the alpha kings of capital need more than just nice offices, right? And that's a really great point is that unlike in New York City, where you're basically plugging into the API of a world-class city, right? Here, you have to build all of that infrastructure before the tenants will come. And so Steve Ross just took it upon himself to do that. Absolutely crazy. So let's talk about the education component, because I think that's the most fascinating bit here. Will Krasne (09:17) It's a big issue because if you were sending your kids to Dalton or pick a number of any one of the schools in New York and you go down to Miami and you're like, I don't know, Gulliver Prep's like, am gonna cut it? And it's a huge thing. mean, people are worried about like where their kids are gonna go school. Like Ken Griffin donated $50 million to some high school to make sure like all of his Citadel kinds of kids could get in there. Hiten Samtani (09:40) It's much more than just having the name on the wall, which he will obviously have to, but it is really about like, if you don't do this, it's going to be much harder to recruit talent for all these companies that Steve Ross wants to bring into West Palm Beach. So he is bringing a private K through 12 school to Wellington, which is a town right by our village, right by West Palm Beach. Will Krasne (09:52) Yeah, so what has he done? Also, Wellington is the horse capital of the United States. of course. Of course, of course. Yeah. So Bill Gates has houses there. Our good friend Mark Gansy spends a lot of time there. Hiten Samtani (10:03) horse. ⁓ So the village sold him 35 acres for $47 million. Will Krasne (10:14) Pretty good bit of business for the village. Hiten Samtani (10:17) little bit. So that's the school and then to create a pool of talent in West Palm Beach you also need a university. Will Krasne (10:24) Right, and you would think West Palm, we've got University of Florida, we've got Florida State, we've got Rollins College. but no, no, no, who's coming? Hiten Samtani (10:32) Mm-hmm. Vanderbilt University. Will Krasne (10:42) God, Vanderbilt. Hiten Samtani (10:44) Vanderbilt University is bringing a half a billion dollar campus to West Palm Beach. Steve Ross was instrumental in making that happen. He was courting them for a long time. Did he have a gathering at his Palm Beach mansion? Ron DeSantis, Nelson Peltz. Yeah, all these big guys showed up. This has been in the works for a while and Steve Ross has really been at the center of bringing that together. Will Krasne (10:56) You'll to tell me a little bit more about it. It's over a year. Jeff Green has been trying to do it. Hiten Samtani (11:09) Yes, so before Vanderbilt entered the picture, the University of Florida was in talks to build a campus in West Palm Beach. However, those plans fell apart over this is just the best part of it. There was a naming disagreement with Jeff Green. Will Krasne (11:23) Fantastic. That's so good. That's what happens when Mike Tyson is your best man. My style is impetuous. My defense is impregnable. It's a huge name to bring them. There's such a Nashville institution to get them here. I mean, take some serious doing. Hiten Samtani (11:25) It's just philanthropy, Let's talk now about the office tenants that he's bringing. So there was this massive talk during the pandemic about how Miami, Wall Street South, the new capital of capital, et cetera. But Steve Ross is almost trying to engineer a bypass of Miami altogether. He's creating a second Wall Street, but it ain't in Miami. It's maybe in West Palm Beach. So he's brought Point 72, which is your guy Steve Cohen's shop. Goldman Sachs is coming to his complex as well. Pretty impressive name so far. Will Krasne (12:06) Right, when you think about it, it really makes sense because Miami is very hard to get around, education is tough, public transit isn't necessarily there. And you think like, what's gonna be stable? Are people gonna be there for the long term? Because you've seen a lot of people go to Miami come back. That's a phenomenon that really happens. And I think he's really trying to create the holistic 360 life for people where you can say like, I would have wanted to live in Greenwich, I would have wanted to live in Rye, Fairfield County. And he's like, just come here. It's that, but the weather's better and there's no taxis. Hiten Samtani (12:39) There's no taxes and there's, I think unlike Miami, there's no undesirables, right? You're starting somewhat from scratch. You can build the idyllic town for the well-heeled without having to worry about being in an actual city. Will Krasne (12:50) Exactly right. mean, you have sort of all the connectivity of Miami, but you've got a livable city with education that's not just like, hey, I can go to whatever that ⁓ Salt Bae's steak restaurant, or Dragon or Komodo, whatever the hot restaurant that Robert Rivani is leasing to. You can say like, I can have a real life here that's sustainable and where I'm not going to want to go back to New York. And bringing it back to self-funding it. Who in their right mind, if you have to make an IRR, is gonna build a school like that? Is gonna spend the money to bring Vanderbilt here? This is a legacy thing. Yes, he's trying to make money, he's Steve Ross, but this is not a project that we talk about. The Cowboys used to do stuff off the spreadsheet. This is what they would kinda do. You do a great thing because you are a great man. Hiten Samtani (13:38) This is a cowboy who has kind of walked in the institutional hallways and is like, you know what? I kind of want to be a cowboy again. Will Krasne (13:44) I talk about like one day hoping to be wealthy enough that I can buy hotels again. Like this is kind of like, I hope I can get back to just, you know, shooting from the hip. Hiten Samtani (13:52) something I think about in my life for sure where I'm at in my career, but how much can you port over to what you do next? And how much is a function of where you were at? I think Steve Ross is a really good example of porting over a lot of the capital relationships, a lot of the ideas, obviously a lot of the development know how that goes without saying, but he's been able to stitch together this plethora of lenders and whatnot. And he's been able to do it with this one man show in a sense. Like I haven't heard, do you know of any other related Ross Hiers? He's very much like the face of this and in the center of this. Will Krasne (14:25) I have not. Yeah, I mean, my assumption is that he's got a pretty significant family office that are really helping like do a lot of the back end or maybe some like there's a part of related which is helping out just in sort of the organizational part of this sort of like how point 72 a bunch of the analysts were just doing stuff for the Mets for a long time. They didn't like make analytics hires. It was just like, know, hey, you're doing TMT here. You're going to be doing OPS and Vips. So using this equation on the upper left right here, I'm projecting that. Hiten Samtani (14:59) doing 99 games in order to the postseason. think about that a lot. Like you're you're starting afresh. You have all the experience, you have all the wealth, you have all the capital, you have all the relationships. You're building your own machine. It's just interesting how he's kind of going about it. It's just really fun to watch. And this is clearly a guy who's having a good time. Will Krasne (15:18) Exactly. The last two huge projects you did, there was so much pressure, Hiten Samtani (15:22) Time Warner Center, Hudson Yards. Will Krasne (15:25) Just think of what like the economic realities that they came out of dealing with the city, dealing with retail failing, office changing, all these things. And now you just got a blank canvas. You don't have to worry about capital. You've got a lender who's going to do right by you. Hiten Samtani (15:40) You've got a mayor who just gushes at anything you say. Will Krasne (15:43) That's the dream. Like we talked last week that you're going to have Benny Algenway outside of L.A. Country Club. Steve Ross is going to have West Palm Beach is going be called West Palm Ross. Hiten Samtani (16:00) All right, so we talked Steve, now we got to talk Gary. Gary Barnett, man, he's done it again. Extell has landed a $1.2 billion dollar pref commitment from an unnamed hedge fund, we have some speculation as to who it is, for nine projects that are kind of in various states of mix. Will Krasne (16:14) I'm like getting nauseous thinking about the current portion of that pref stack. It's Hiten Samtani (16:19) So much press. Why go the pref route for something like this? Will Krasne (16:22) Because you can't get comments. Hiten Samtani (16:24) You Will Krasne (16:26) I mean, can't think of another way. It's almost as expensive as common and you're gonna get eaten alive. Imagine this, it's 7 % current. It's gonna be less because none of these things generate any cash flow. like, even if it's 12, that's $140 million a year that's just picking. I know that I have some friends who are gonna be like, well, Gary's good, like his bass is so good. Like, I don't give a shit. Hiten Samtani (16:49) You're very conservative. Well, Gary lives a different way. Will Krasne (16:52) I'm not conservative if the people knew like what you know What's keeping this thing afloat like they would know that I am NOT conservative and I have pref accruing right now It is not you know 1.2 billion and it's still kind of like eating alive So Gary like on the 21st of each month when he emails you the statement saying how much is accrued like how do you not have a cardiac event? Hiten Samtani (17:14) Well we've talked about his risk tolerance kind of being pretty natural, right? And this is certainly part of that. We're talking about some very, very significant projects for New York here. The 1.8 million square foot development of the former ABC Disney campus on the Upper West Side. super tall theater district hotel which is dubbed The Torch. It's pretty bad. There's something uptown where he's jumping into ABS's project. I want to say it's in Harlem. And then my favorite... Will Krasne (17:32) Maybe the ugliest building in the world. Hiten Samtani (17:41) Deer Valley Ski Resort in Utah, which we still have to do a real episode about because it's absolutely phenomenal stuff. Will Krasne (17:47) We really do. you know, Stein Erickson rest in peace is looking down on us and going, gosh, that's my guy. Hiten Samtani (17:53) Listen, if you guys haven't already checked it out, I'll drop this in the show notes. Go read the promotes thread on the Deer Valley project. It is the most audacious real estate play that I've seen in the modern era. It's just phenomenal. It brings everything. Will Krasne (18:05) We almost can't even like start getting into it now because we're just not gonna end the episode Hiten Samtani (18:08) We'll get distracted. let's talk about the pref component here. So it's $1.2 billion. Will Krasne (18:13) So here's the thing, it says committed. like when is it getting funded? How is it getting funded? How is the interest being accrued? All of these things I'm very interested in because it's not like he needs the 1.2 billion today for everything. These are all questions we're never gonna get the answer to, but practically speaking is important to think about because if they're accruing the full one, two upfront, which I'm viewing it like a future capex deal. if you buy a multi-deal and you have preff, in some cases you'll have like a completion guarantee on renovating units. And they'll hold back a portion of it, which you can draw and then start a current on that. And a big negotiation point is like, do you pay interest on the undrawn or not? And for Gary, it's a big question because where is that 1.2 going to get spent? How is it being accrued? Because if they're calling all that day one, I mean, I don't see how he gets out from underneath it. Hiten Samtani (19:01) sure how it's structured. We normally wouldn't even know about things like this, like a preff commitment in the background. The reason we know about it again is this was a filing on the Tel Aviv stock exchange. Gary Barnett has gone and raised money in Israel on the bond market there. So that comes with some kind of disclosures that you have to make. And this is where this was buried. Will Krasne (19:20) So you think it might be JVP. Why do you think that? Hiten Samtani (19:23) Three reasons I think it might be JVP, all right? They love PrEP. They had a lot of equity bets. They owned a portfolio with Cortland, which we've talked about, a big multifamily player. They have been pushing Cortland to exit that portfolio, and now Cortland's been selling, I think it's about 4,000 5,000 doors that they own, because JVP wants out. Okay, so they love PrEP. They're already funding two giant deals for Gary. They're involved in the Four Seasons component of the Deer Valley project. They're leading the $600 million construction loan for that. And they led the 1.2 billion refi on that that Upper West Side supertall was ago 50 West 66th. JVP were the guys on that. So there's two reasons. The third reason is they really like messy development. I didn't realize this until a little bit later, but they are the senior on the Rally Miami Beach, the schmoo project that we've talked about. Will Krasne (20:14) outstanding. Great work. Hiten Samtani (20:18) Some people might think JVP stands for Jerusalem Venture Partners, which is a very well-known JVP. Nuh-uh. The JVP here is just an acronym of the founders. John Elusi, Van Nguyen, and Anthony Pezzonia Shaskis. That's JVP. That's how it came about. Will Krasne (20:35) But man, that's a lot of capital to one guy, to one sponsor. IKEA? IKEA. Hiten Samtani (20:42) I think we should talk a little bit about the IKEA situation. Will Krasne (20:45) Gary is most famous for his condo deals. Central Park Tower, 157, but he's also been a prolific office and hotel developer as well. He did the W in New York, which I think was probably the project that really made Gary Gary. And so doing the Four Seasons in Deer Valley, doing like a condo hotel, like all that's right in the old wheelhouse for Mr. Barnett. I will say that the ABC Disney campus is maybe a little bit different because when we talk about Hiten Samtani (21:00) Yeah, it set them up. Will Krasne (21:14) someone like Steve Ross, who's really a campus developer within an urban setting, Gary is more like a, here's my spot, I'm going vertical. Hiten Samtani (21:22) Do remember Gary at one point owned a television city? They did not develop it. He has done office before. He is building 575th Avenue. And that's a really interesting deal because again, he's figured out a way to de-risk this. So IKEA had committed a slice of equity in pref. We've now found out via the Tays that it's $300 million that they're putting into the tower. Will Krasne (21:25) They didn't develop it. So this is a big part of the Gary playbook. He's done this before Central Park Tower was for a time known as Nordstrom Tower. That's right. Because he sold the bottom few floors to Nordstrom for, do you remember how much it was? I think it was like three or $400 million. That was a lot. It was a lot of money that I'm sure the Nordstrom family would like to have back. Hiten Samtani (22:01) He's got IKEA in here. They're doing 300 million in equity and pref. And then he's got Simpson Thatcher, the whitest of white shoe law firms is taking 700,000 square feet at the tower. So there's your anchor tenant. Will Krasne (22:14) massive deal, enormous, even with what I assume is a monster TI and free rent package, just a humongous queue. again, these are the types of things like the cashflow stream is like, that's how you get these things financed. And to do it at this level, humongous. Hiten Samtani (22:33) And another project on Madison Avenue, the one he bought from the Cohen family, Williams Equities. So there had been talk that he was going to bring Chanel in for the retail condo. And the taste filings appear to support those negotiations. Chanel had been looking to buy this retail condo for $450 million. So there you go. Will Krasne (22:51) Bruce Willis said, know, Chanel's looking at all these other groups who are buying their retail space and like... We talked about how Steve Ross can de-risk and put together urban campuses. Gary just pulls rabbits out of hats with capital. There's never been anyone like him. He's used every source. It's traditionally been common from whatever the zeitgeisty place to find the equity is. And right now, what's in the zeitgeist more than preff? Everyone wants to be preff. And here he comes getting the most preff of anybody. And that's Gary Barnett. I mean, God love him. So back in May, we had Barrett Lindbergh on to talk about a new bill that was going to potentially be the nuclear option for traveling HFCs, which were the tax abatement programs. Hiten Samtani (23:49) a lifetime of a generation. Will Krasne (23:51) slash scheme of in taxes that allowed people to fully abate property taxes for doing basically nothing. Hiten Samtani (23:58) basically you would get your property taxes wiped off in exchange for committing a certain percentage of units to be affordable. The trick shot here was that the affordable rent threshold was oftentimes higher than the market rent threshold, which means you had to agree to nothing and in exchange you got everything. And it turned into this massive cottage industry of consultants and debt brokers and syndicators essentially. Everyone under the sun came together. They really united around this. Will Krasne (24:23) lawyers. Hiten Samtani (24:28) this massive freebie to create this incredible grift in Texas, which wiped off billions of dollars off the tax rolls in cities that really needed it, Dallas, Houston, et cetera. And the important thing years was the traveling component. an authority in let's say Cameron County far away could create an HFC structure for a deal in Dallas or a deal in Austin. So this went on for quite a while. And then in May it was shut down with extreme prejudice. Will Krasne (24:55) Barrett called it the nuclear option because there was a retroactive component to it so you could owe the taxes that you had abated. Hiten Samtani (25:02) In some cases it would like complicate your prior contracts with your agency lender, right as well. So it was really really messy Will Krasne (25:09) or put you in default. Hiten Samtani (25:14) Everyone knew the party was coming to an end. They were fine with it. They're like, we had a couple good years. Let's move on. Will Krasne (25:20) Right when the ducks are quacking you got to feed him. Hiten Samtani (25:22) However, the retroactive component is seen as so damaging because who knows how it's all going to shake out. This happened in May, as we just said, there's been a couple of months of the sponsors licking their wounds, trying to figure out their move, and now we're seeing their move. So there has been a legal action filed by one of the most active proponents and consultants in this HFC program called Post Investment Group. And it's run by a guy called Jason Post. And he is joined in the lawsuit by a workforce housing coalition, which is basically a trade group. for a lot of HFC users and they're suing an appraisal district where the county seat, it's called Bexar County Appraisal District. Exactly. And they're suing them for a couple of reasons. One, they're saying that the retroactive component of HB21 violates existing contracts, right? So it's unfair. It gives municipalities unlimited power and it unconstitutionally applies to old deals. Will Krasne (25:58) Yeah, in San Antonio. arguing. Why are you talking about old shit? Hiten Samtani (26:19) The other part that I loved, and this is why I love America so much, they said that doing it this way retroactively will undermine the faith in our capital markets. That if a deal is no longer a deal and you can go back and change the terms on it after the jump, it basically disincentivizes people to bet on Texas, to bet on America in a sense. Will Krasne (26:42) Unless you let us grift freely for nothing, no one will invest money here. Exactly. Hiten Samtani (26:47) That's the argument. So Williamson County is trying to unwind a traveling HFC deal that was done there. And this Workforce Housing Coalition is also trying to intervene there. So we're very early in this legal process. We're going to see how it shakes out. But the whole idea here is that if you just leave old deals alone, we will accept our loss and move on. But if you're going to get back into our books and try to mess with contracts that we have, we're not going to go down without a fight. Will Krasne (27:12) And I suggest everyone go back and listen to the episode in May, because Barrett did an amazing job walking through how people use this program in good faith because it does do a good thing and provide affordable housing that wouldn't otherwise get built, and how folks who did not use it in good faith caused this and are now suing. Hiten Samtani (27:29) I read you something that is now deleted off of LinkedIn, but one of the syndicators who used the program. Will Krasne (27:34) you do the unquotable quotes of the year for the promote like this is on the shortlist for number one. Hiten Samtani (27:40) This is the quiet part out loud into a hundred. So this gentleman, David Lilly is his name, said the following, do I feel bad about taking money off the tax rolls? R O L E S. Not really. I'm just getting some of my money back that you misappropriate anyway. This is a really, really big, it was like the defining story in Texas multifamily, really multifamily writ large over this past year. So I'm very excited to see how it goes. Will Krasne (28:08) And this is an issue that's playing out nationwide because affordable housing is a problem almost everywhere. People are really putting money into the space. True America and Many Life just did an enormous joint venture for affordable housing and light tech deals. And we say it'll be interesting to see what happens, but it can be indicative of what broadly is going to happen in a lot of jurisdictions elsewhere throughout the country. And that will have downstream effects that we don't even know yet. Hiten Samtani (28:33) I think we've talked a little bit about incentive design and how the backlash to things like this, which are clearly, we're clearly abused, how the backlash. Will Krasne (28:42) they were schemes. Like, they were absolutely schemes. Hiten Samtani (28:45) Yeah, schemes not in the British or Indian sense, but in the American, the good old American sense, like a real scheme. Did you know that a development in the UK is called a scheme? Yeah. Will Krasne (28:54) Is it really? Fantastic. Hiten Samtani (28:58) Just like in back of the day here, a real estate developer used to be called a promoter. You knew that one. Will Krasne (29:06) I did not. We gotta bring that back. Hiten Samtani (29:08) On a more serious note, incentives like this that are designed with the intent of creating much needed affordable housing, when these things are abused, it creates a severe backlash that can really hurt the cause. Will Krasne (29:20) We can look no further than New York City. The rent law in 2019, it was completely an overreach, total overreaction, but it was coming from a place that's completely understandable where people were using individual apartment improvements, major capital improvements, which are in theory a very good thing to help people improve old housing stock and make it safe, clean, affordable for folks to live in and incentivizes people to invest in this type of housing. You had folks who abused it, who would, you know, we've talked about this ad nauseum, but would turn off heat, not respond to work orders, make apartments dangerous and unlivable. All of those things. And so the real estate industry had to look in the mirror and be like, you know what, like they completely overreacted and this law is causing tons of damage. Hiten Samtani (29:58) lieutenants all that kind of thing asking for self-reflection from real estate people really will? Come on. Will Krasne (30:12) I know, but this is what I'm saying here is that if you abuse it, it's going to go too far the other direction. I mean, the retroactive component of this is no different than not allowing for individual apartment improvements and rent stabilized apartments in New York. Hiten Samtani (30:28) If you game the system, the system may change the game on you. Will Krasne (30:32) Hehehehehe ⁓ Hiten Samtani (30:41) That's it for the Promote Podcast this week. We'll be back next Wednesday with more CRE insider goodness. Will Krasne (30:46) Speaking of incentives, to have people write the best reviews for us in this next week, whoever has the tastiest review on Apple, not Spotify, just Apple, will receive some fun. Hiten Samtani (30:57) I'm designing it on Canva as we speak. Brands, a reminder that we're partnerships at thepromote.com for advertising. Hit us up there. Yeah. Will Krasne (31:04) our audience of psychos, lunatics, audience of folks in the real estate industry, like this has legs, you should definitely hit up partnershipsthepromote.com. Hiten Samtani (31:08) It's not gonna stick. Psychos is not gonna stick. All right, well, thank you. I'll see you next week. Will Krasne (31:21) Thank you man, have a good one. Hiten Samtani (31:23) Ciao!