Latest / The Promote Podcast / Apollo's Sister Act, ICE Age & the Doomed Tower of Power
Transcript
- Hiten Samtani (00:03) There seems to be much greater value placed on what we do from an origination perspective in the institutional market than in the public market right now. Will Krasne (00:11) As Buffett said, in the short run, the market is a voting machine and it's voting against private credit compensation. 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 (00:31) and I'm Will Krasne. Hiten Samtani (00:35) Shout out to our sponsors for this episode, Loan Boss, which is a best in class CRE debt management software. Will Krasne (00:40) and Bravo Capital, which is one of the markets leading HUD and Bridgelenders and one of the best named too. Hiten Samtani (00:45) It is pretty good. This week, we discuss Tishman Spire making another run at the Chrysler building with Aby out, Robbie's raring to go. We then discuss how the ICE immigration crackdown is putting another big question mark on the already troubled Sunbelt multifamily market. And finally, Apollo sells to Apollo with Apollo's help. It's going to be a good time. Should we kick it off with the news bulletin? Will Krasne (01:08) Absolutely. Straight out of central casting, we get our guy Kevin Warsh. Hiten Samtani (01:13) Isn't it amazing how quintessential the guy is? Will Krasne (01:15) It's just perfect. He looks like a fed chair. I'm sure when he was like five in his class photos, he looked like the fed chair. Hiten Samtani (01:22) It's also very much to the Matterborne, isn't it? Will Krasne (01:24) Well, to the man who married, which is more important. You can marry more money in a minute than you can make in a lifetime. He is the son-in-law to the Lauder family, one of Trump's biggest donors and one of the wealthiest in New York. Hiten Samtani (01:34) Our friends at Penceford threw up a dossier about him. There was a couple of good points. One, Kevin Warsh hates QE, quantitative easing, which is basically when the Fed buys government bonds on the open market to juice the money supply. He's not a fan of the practice at all. Will Krasne (01:48) He's also an inflation hawk. And I got to say, my man JP really went in here. This was great, where when unemployment was 9 % and inflation was 1%, he's like, I'm really worried about inflation. Hiten Samtani (01:59) Yeah, that's a single issue voter kind of guy. He also thinks the fed's main game is setting rates. He doesn't want the fed to be distracted by... Will Krasne (02:07) anything else and not renovating buildings for $4 billion or what have you. Hiten Samtani (02:11) He's going to be the MVP of the markets is how I think about him for the next however long he lasts. Will Krasne (02:17) When I was growing up in DC, I went to a commander's game at old RFK Stadium. And I remember walking out and the crowd started chaining lower interest rates. And I remember being like, Dad, what's going on? And he's like, oh, that's Alan Greenspan. He's chairman of the Fed. Hiten Samtani (02:32) The chairman of the Fed has always been a big kind of figure in business and pop culture. Will Krasne (02:36) You had Paul Volcker basically ushering in the recession when he broke inflation. Hiten Samtani (02:41) What do you think the Krasnick rule would be? If you had to have a rule named after you, do Will Krasne (02:45) Everyone's broker than you think. Hiten Samtani (02:48) All right, next one. Brookfield seems to have misplaced some value in an OZ fund. Will Krasne (02:54) This was great. So the fund, which was called Brookfield Opportunity, 71 IV7, I think. Hiten Samtani (03:03) ⁓ Is it just the number of funds they've raised to date or something? Will Krasne (03:06) who knows, had an internal rate of return of negative 18.3 through the third quarter of last year, which again, we're not here to shame bad returns that. When your investors aren't sure what the fund owns, how long it's owned it, where the losses are coming from, then it's something that we want to dig into a little bit. Hiten Samtani (03:15) Things happen, right. But isn't that classic Brookfield? One hand pays the other and then the other hand's tied behind someone else's back. Will Krasne (03:30) Brookfield walked so Apollo and Athena could run. Hiten Samtani (03:33) We're going to get into that in a bit. But I think the big question for me is who's better at OZ investing, Brookfield or the mooch? Will Krasne (03:40) remains to be seen. But my favorite part of this is that the investor goes, everything here should have done OK, except for the mall that we bought in Connecticut. Hiten Samtani (03:49) boy. All right, next one. With the Willis Tower kind of in the market now because Blackstone's trying to sell it after a decade of a math run at the tower, Donald Bren's getting in the game here. Will Krasne (03:59) So Donald Bren, every time you think, wow, this guy owns all of Irvine, know, richest guy in the US in real estate. he actually also owns the MetLife building. He owns three massive million plus square foot towers in the loop. Actually, I don't know Chicago that well. Like, is North Wacker in the loop? Yes. God. So he is trying to sell one North Wacker, which is actually performing well. It's pretty well leased. The debt yield is north of a 10 on the existing financing. Presumably this should be a pretty good outcome and I think it's gonna be a bellwether for the Chicago office market because a lot of the trades We've seen there have been distressed vacant having issues. This one's performing well Hiten Samtani (04:36) You've seen Beacon lose their shirts on a bunch of things. Even the landlords who held onto their buildings are cash in refi, painful recaps, all that stuff. Will Krasne (04:43) happening. And so this one should trade pretty tight. Great building, great address, performing well with plenty of equity baked in. So we shall see. Hiten Samtani (04:51) One thing we do know for a fact is he would not be spending any of the proceeds on defending his son from investor lawsuits. Will Krasne (04:57) we do not have a personal or professional relationship with this individual. Hiten Samtani (05:03) Still the coldest statement I have ever heard. All right, last one. The Carlisle deal that just happened in New York is super interesting. Just to recap, Carlisle sold a portfolio of about 1.3 million square feet, Manhattan, Brooklyn, Queens, and a little in Staten Island for a billion dollars, which is $790 a foot for self-storage. Will Krasne (05:24) That's a pretty good office price from the beach. Hiten Samtani (05:26) It's exactly what I was thinking. The buyer here is StorageMart. think New Yorkers will best know that name from the owners of the Manhattan mini storage empire. Yes. They paid $3 billion for the Manhattan mini storage empire in 2021 and now they're doubling down. It's an astonishing run of acquisitions here. Will Krasne (05:45) I know it's massive. I GIC is in here, Cascades in here. It's the ⁓ who's who of institutional investors. And Manhattan mini storage too. I just want to shout out my guys at Edison who top tick absolutely everything. That's exactly where I was going. They sold the land to Zeele Feldman and HFZ for the 11 at a thousand bucks a foot. They top ticked Manhattan storage pricing, but maybe not here. Hiten Samtani (05:59) You know they sold the HFZ site. No, they kind of did because I think they sold at $970 a foot and this one sold at an incredibly high price but $790 a foot. Will Krasne (06:20) All right, so me top tick tick, great. And they still own Edison parking. They have sites all over the place. So those guys, well done. Hiten Samtani (06:26) We've talked about with Carlisle and a couple of these groups are trying to do, which is institutionalize a heretofore scattered asset class. So in 2020, a key tax abatement called the ICAP ran out for self storage. You can no longer use this for self storage facilities because that abatement supposed to spur job creation and self storage facilities are basically like one guy if that automated. So they bought these up. They actually amped up the pace of acquisitions after this abatement ran out. And at some point they basically became, if you had a self-storage portfolio to sell in New York, you were calling Carlyle. Will Krasne (07:02) Parallel puts together these buy boxes and then again as we've talked about, there's a whole industry about front running their buy box and putting it together for them to sell. Hiten Samtani (07:10) We've talked a bunch about the walk-up empire in Brooklyn that they built, and now I've refied for about a half billion dollars through the agency. So pretty, pretty interesting playbook they have overall. So, Will, you violate any dead covenants recently? Will Krasne (07:30) So funny you should ask. I have been in technical default recently. I mean, who among us? But not since Q4. And that's not because I paid off the loans, because that's when I started using loanboss. Hiten Samtani (07:42) I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that. Will Krasne (07:48) 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 (08:11) It just got it sorted here for- Will Krasne (08:13) Much better. So thank you, lone boss. Hiten Samtani (08:16) Listeners, check them out at loneboss.com. That's loneboss.com. And tell them the promo sent you. Okay, Tishman Spire coming back into the Chrysler building. I love this building. It is kind of the embodiment of New York real estate. It has attracted capital from all over the globe. There have been some fascinating twists and turns in this Art Deco icon's history. And now Tishman Spire is making another run at it. So A.B. Rosen, Abai to Will Krasny here, lost the Chrysler building a few months ago. Him and his partner, Rene Benko, owned it together. Rene's had quite a run. Will Krasne (08:54) Before we get to Renee Benko, I just want to briefly talk about Billions, I think, season four. An episode's called American Champion, and the guy who's supposed to be Warren Buffett is trying to buy the Chrysler building because he's like, it's going into the hands of the Japanese. And we can't have that. And Wags buys the building coming out of a meeting in the Chrysler building. Literally, Warren Buffett's waiting, and they're like, Wags, great job. You just bought the building. I'm like, that's not how this works. And I stopped watching Billions until I was on Billions. Hiten Samtani (09:22) person that gets off on. Will Krasne (09:24) I really don't. Anyway, Rene Benko. So Austrian property magnate slash playboy slash philanthropist, current felon. Hiten Samtani (09:29) slash playboy. Will Krasne (09:36) So he flew onto the scene, he would buy these landmark properties, and he also owned a bunch of operating retail businesses. So not unlike what's happened with Saks, and actually I think they bought Galleria Koff-Auf from Saks, or from Hudson's Bay, where he would own these retail companies and then sign way above market leases to pump up the value of the buildings and then siphon off tons and tons of money out of them. You know why? Because it works. Hiten Samtani (10:00) Try it in True Playbook. At some point, I think he was one of Austria's richest men, lived the life, became A.B. Rosen's backer on a bunch of things. They came in, they teamed up in 2019 to buy the Chrysler for $150 million, which is nothing. There's a very interesting reason I think writ large in New York real estate about why some of the most iconic towers on the skyline can trade for Vupkis. Will Krasne (10:26) Right, so the Chrysler building is on a ground lease to Cooper Union. Yes. Basically, the largest asset in Cooper Union's endowment. And the ground lease was set to reset right when AB bought this. So they were paying some, I think, a couple million dollars a year of ground, which is a lot of money, but relative to the income that a building like this generates, not much. Sure. But then it increased, I think, to north of 20 and is now set to reset north of 40 a year. Hiten Samtani (10:55) And so imagine what that does to your NOI. basically eviscerates your NOI. We've seen this issue play out across New York. A lot of the landowning families that own the fee have done this with a lot of the well-known landlords and as a result, we've seen tons of distress. So the Korens, the Goldman family, Ashkenazi and our boys at SL Green. Yeah, dealt with extreme prejudice there though. That worked out just fine for SL Green. I was surprised, Will, that you didn't bring up one of the most interesting Will Krasne (10:59) The building's worth nothing. Yeah, Barneys. Hiten Samtani (11:25) players that was involved in the history of this building. Jack Kent Cooke of the Will Krasne (11:29) man. Hiten Samtani (11:35) Do know how he got it? It's an amazing story too. Will Krasne (11:38) So yes, this was part of selling the Lakers. So he got divorced. so Jack Kent Cooke was talking to Jerry Bust. He had a tax issue, so he needed to take pro- Hiten Samtani (11:50) This tower at the time is sitting with Mass Mutual because they've just done a Lender take back seize. So they've taken it from Sol Goldman, one of the heavyweights of New York real estate. Yeah. They've taken it back from him and so they're sitting on it. Go on. Will Krasne (12:02) So Jack Kent Cooke is talking to Jerry Buss to sell the Lakers. He's like, I need real estate for some tax reason. Jerry Buss is like, I own a bunch of crappy apartments in Santa Monica. Does that interest you? And he's like, absolutely not. I want the Chrysler Building. And so Jerry Buss, as part of this, figures out a way to engineer a swap to get the Chrysler Building to Jack Kent Cooke. Jerry got the Kings, the Lakers, the Forum. And then a random piece of land in like Northern California, I think where his ranch was. And then his apartments went to somebody else who then sold the Chrysler building to Jack Kinkook. Hiten Samtani (12:40) The bus absolutely got the better end of the trade. Will Krasne (12:42) Oh my god, this whole thing was done for $67.5 million or something. And of course the Lakers recently sold at a $10 billion valuation. We're so excited about Tishman coming back because Tishman was the once and future king here. They bought it in 1997 for 220 million, about 180 a foot, and then did phenomenally well on it. Hiten Samtani (13:06) We don't maybe give them their flowers because Stytown happened and a bunch of other kind of mad outcomes. But I think Tishman Spire is one of the best in the game at attracting that sort of quote global capital, right? Their sovereign playbook is absolutely 11 on 10. They got a number they'll be here at a what kind of valuation. Will Krasne (13:24) I think as high as 800 million. So they sold off all of their exposure, except I think they had a nominal grub stake, 10 % or something, because I think they were still managing it for Abu Dhabi and kept a little piece. Hiten Samtani (13:26) Pretty damn good. Abu Dhabi didn't do very well here. A.B. Rosen and Rene Banco come in. What's his company called? Cigna, I believe. I love it when there's no S in the holding. To me, that's prestige. Will Krasne (13:44) Cigna, Cigna holding. think that's why Renee Bango and A.B. partnered together because they are both holding. Hiten Samtani (13:54) Is it a European thing? Probably. It has to be. RFR and Cigna come in at $150 million valuation, again, with that massive ground reset looming. They have a little bit of time to figure out a lot of things and they can't. They just can't make it work. Will Krasne (14:09) Don't aggregate me as Brian Windhorst would say on the Hoop Collective. But I heard that the investment committee for this was less than robust. And it essentially came down to AB saying, I'll figure this out. I'm AB Rosen. Hiten Samtani (14:23) Sometimes you need a guy with a yacht just making a call. That's what makes this business so fun. Will Krasne (14:27) And to be fair, I think they were pretty far down the road with Cooper Union on agreeing to something because again, Cooper Union doesn't want to take this thing over. They can't manage it. Hiten Samtani (14:35) And they can't really sell it because of the massive tax liability that they would have, right? So they can't sell the whole thing outright. Will Krasne (14:40) Yeah, so everyone's kind of incentivized to do the thing. However, the monkey wrench here is that Rene Benko, in the middle of this negotiation, his whole empire collapses, and he is now going to jail. Hiten Samtani (14:50) He suddenly becomes front page fodder for the FT for multiple weeks in a row. Will Krasne (14:55) It's tough when you end up as the guy, the main character in the FD8. Hiten Samtani (14:58) He was absolutely the guy in the FT for a bit. so AB Rosen's being asked, all right, dude, what are you going to do? They're looking to figure out a way for Benko to exit his stake and AB to hold on to his share in the building. Will Krasne (15:10) problem is that with the ground lease reset, means none of the cash flow really can be reinvested in the building. So the building is capital starved at this point. There's reports of mice in the building. Now the elevators work. It's part of RFR's leverage is going to Cooper Union. This thing's a mess. Like, do you want to take it over? Like, you don't. You definitely don't. Hiten Samtani (15:27) both sides are talking tough, Cooper Union moves to evict. A.B. Rosen and RFR claim that Cooper Union's mishandling of the Gaza-related protests negatively impacted the values of this building. So things are getting really ugly. Cooper Union wins the key decision, and that's it. A.B.'s out. Will Krasne (15:37) Right, forgot about this. He's done. He's ejected from the ground. Hiten Samtani (15:48) can no longer collect rents on the property. Will Krasne (15:50) There's some stuff going back and forth though because the Chrysler building is trademarked. So there's, I think, a question of who owns that trademark still, so whether it's separate from the building itself. Hiten Samtani (16:03) Interesting. anyway, this comes back on the market and generally for people who are not familiar with the New York skyscraper listings, they're an event. You get big headlines for them. They typically go to one of maybe three groups in the city. This one kind of happened randomly. It was on the market. The promote found out about it. No one had written about it. Savils is marketing it. Savils? What's going on? Will Krasne (16:25) Savils is studly, what can he say? Hiten Samtani (16:28) So, this is like a weird quiet listing that's been in the market for a few months and now we find out that Tishman Spire is making another run at it, which to me makes a lot of sense. You come in at an incredibly low basis. You already know the building cold. You hopefully have a decent relationship with the fee owner, which is kind of the linchpin of this whole thing. Will Krasne (16:48) Totally. again, you also have the capital, you're buying this thing low enough to have the capital to fix it. That's always the issue with buying these things. It's like, oh, the basis is incredible, but really what's your adjusted basis once you factor in all the deferred, all the capex? That's the thing we could talk about with like the rent stabilized product. Yeah, you're buying it for 80,000 a door, but you got to spend 100,000 a door just to make it habitable. And so Tishman coming in at a low basis makes that more palatable. Hiten Samtani (17:13) What's your guess on what this is going to go for? ⁓ Will Krasne (17:17) Sub hundred. Yeah, I mean, it's just a massive reset in the ground lease. So again, it's sort of like mutually assured destruction. Cooper Union cannot run this building. that is, like, they have to sell. And there has to be some complex, as you said, they have tax issues, you got to like figure that out, which again, Tishman, as sophisticated as they come, can do that, solve their problem. So I think this makes lot of sense. I'd heard that a couple folks were looking at this as a residential conversion, which would be interesting. Hiten Samtani (17:47) The other thing that Tishman can do is we kind of hint it up top is they can buy their time and then they have kind of the know-how, the wuss that will bring in another Abu Dhabi at some point, right? They know that whole universe. At some point they can go and spin the story like, hey, this remains an icon of the New York skyline. Sure, it had some issues, but you know, we've cleaned it up since then and you're good to go. Will Krasne (18:06) This is the whole de-risking playbook where you take the hair and you do that on balance sheet or with a partner and then you fix it, max out the value and bring somebody else in. So they may just rinse and repeat the same thing they did when they bought it in 1997. Hiten Samtani (18:31) Alright, I'm here with Aaron Krawitz from Bravo Capital. Aaron, let's get right to it. What's the story behind this mythical 100 % HUD approval record? Aaron Krawitz (18:39) Pretty straightforward. We have an amazing team. We're pure play HUD. We're focused on bridge to HUD all day. We're both fully HUD licensed and we also offer a balance sheet bridge financing where we could finance deals over a hundred million dollars just like we did in Miami, Brooklyn and Jersey City. Hiten Samtani (18:55) And what's the secret sauce? How do you put it all together? Aaron Krawitz (18:58) It's our underwriting. We don't rush deals to market and hope they stick. We know what HUD wants before we submit, so there are no surprises. And we have a real balance sheet. So when we go, we go. Hiten Samtani (19:08) You were telling me when we were chatting offline that you closed a HUD Express lane deal in four days? That's absurdly fast for HUD. Aaron Krawitz (19:14) Hiten, that's why we get up in the morning. At Bravo, we're here to break records, we're here to innovate, and when you have tight documentation, the right underwriting, that means speedy approvals. Hiten Samtani (19:24) and speed means the sponsor can close quick. Thanks Aaron, good to have you on. Aaron Krawitz (19:27) Thanks for 10 and you can find us at bravocapital.com. Hiten Samtani (19:32) you We're not really political on the show, I think this is interesting because the broader political conversation is impacting particularly the multifamily landscape pretty hard. We're talking about the whole immigration crackdown. Pretty interesting and kind of alarming trend going on with. Will Krasne (20:02) Immigration crackdowns nationwide have had a pretty meaningful impact on apartment leasing and occupancy. And John Burns, the real estate consultancy, who are fantastic, really good data, commissioned a survey where it said that 40 % of apartment owners reported that immigration policies have hurt leasing and occupancy rates, and particularly in markets that you would expect to have a lot of immigrants. So the sun belt. Hiten Samtani (20:28) Phoenix, California, et cetera. Will Krasne (20:30) Exactly. So some of the results of this survey are pretty startling. In Florida, where about a fifth of the population is foreign born, two thirds of landlords that were polled in this survey have felt a negative impact from the immigration policy enforcement, according to the report. In Texas, another fifth of owners and developers reported significant negative impact, while another quarter said that they felt a somewhat negative impact. Hiten Samtani (20:52) for the most part, lot of these landlords, developers, operators are Republican. So this is not a political statement in any way that they're making. This is like, hey, this is having a material impact on my leasing. This is having a material impact on my finances because I think landlords are essentially being asked to play the role of quasi-immigration agents in a way. And the mechanisms that they need to vet someone's immigration status, et cetera, they don't necessarily have. So it's putting a big damper on the market. It's also impacting activity, right? If you're someone with a of a teetering immigration status, you're less likely in this environment to make any real estate moves. Will Krasne (21:29) And I think people understand how immigration enforcement has impacted labor, especially on construction. But on the leasing side too, you think of all the downstream impacts. So if you're foreign born, you may have to move in with friends or family because you don't want to have your name on a document. Exactly. And so that really puts a damper on leasing. Yep. In apartments, it's all about being above break even occupancy. if on the margin demand goes down, there's huge fixed costs to operate these buildings. And that can have a huge downstream impact. you're seeing in some of these places where you can point on a timeline to where immigration enforcement cranked up to where market occupancies have dropped 400, 500 basis points. Hiten Samtani (22:11) The other part of this is even though the actions will not necessarily impact a large chunk of the tenant population, it's more the vibe of the thing, the expectation that landlords may now have to do X, Y, the contingency that, hey, if we don't do this, we might get taken down by the government. think that changes the investment calculus quite Will Krasne (22:30) ⁓ Right, there's been enough uncertainty around just verification of incomes. Whole industries have been created to snap and other products to make sure that folks aren't like editing PDFs showing like job offer letters or pay stubs and all that. Trying to verify things even above that. It's really hard. Landlords don't really have the infrastructure to do this. And it's really causing an impact. Because again, the difference between 125 dSER and a 0.9 is not that high in terms of occupancy. And this can really knock folks that are already struggling down below the threshold. Hiten Samtani (23:02) Do you think syndicator, Sunbelt syndicators are going to use this as another excuse? Will Krasne (23:06) A hundred percent. ⁓ Hiten Samtani (23:13) All right, let's close things with the classic promote story. When you're having a of a rough go in the public markets, as we've talked about, lot of these reits are getting bodied in real time on the stock market, even the best in class ones. What do you do? Well, a lot of people have no choice but to dissolve and ride into the sunset. Others though, like Apollo, have a few more options. I like what is being said. Change the conversation. Will Krasne (23:34) As Don Draper said, Hiten Samtani (23:41) It's very true. So what are we talking about here? Shares of ARI, Apollo Commercial Real Estate Finance, their real estate credit rate have consistently been trading below book value. They've gone and decided to sell their entire loan book, which is about $9 billion, to another Apollo unit called... Athene, the insurance subsidiary. Will Krasne (23:58) A THIEF. In an amazing self-adda-boy, Athene agreed that they had 20 % premium to recent trading levels per the FT, and ARI said this validates its book value. Hiten Samtani (24:11) We were right all along because our sister company just did this for us. Will Krasne (24:15) Fantastic. Talk about self-creating your homework. Hiten Samtani (24:17) Athene we've talked a lot about on this podcast. She's basically writing the biggest checks all across CRE at the moment. And the reason I think our friend Hunter had explained this really well in that incredible essay we'll link to in the show notes, but well, can you just give a summary of why it's so easy for Athene to do the kind of things it's been doing over the last couple Will Krasne (24:36) This is just like a whole pyramid where a theme originates loans and then you can sell off those pieces and get more equity to originate more loans to sell off the pieces to get more equity to originate more loans to sell off the pieces Hiten Samtani (24:52) So the initial equity is coming from what used to be like a very unsexy, dry part of the money machine, which was life insurance premiums, right? They were not used in a, let's say in a creative fashion prior to Apollo figuring this whole thing out. Will Krasne (25:04) Right. And part of it was everyone's talked about Buffett trying to have permanent capital with insurance, but regulatorily, you could only invest in very specific fixed income. So it's not like any guy can go buy a insurance company and invest in public equities. You have to have certain parameters. so Apollo figuring out how to do this and basically run their entire private credit book, which is the DNA of the company through this engine, is really a masterstroke. They create the perpetual motion machine. of finance here. so if one side of the house doesn't like what's being said, they change the conversation and sell it to the other side of the house. Hiten Samtani (25:41) I think it was a great quote from a very senior Apollo exec, Scott Klein, when he said, the whole game really is built around, can you originate enough attractive assets to meet your needs? If you can figure that out, that's the whole game. Will Krasne (25:53) It's hard to do it in one specific sleeve because there are certain times where real estate finance might not be attractive, corporate finance might not be attractive. But if you have enough nodes into all these different industries, at some point, there's always something to do. Hiten Samtani (26:06) It's actually kind of a great hidden insight. There's always something to do. Will Krasne (26:10) Yeah, like if you have enough surface area, you'll get lucky and find it. Exactly. So that's really what they've done. It's a way to put out a huge amount of capital into a thing that they know. They know these loans. mean, Athene's already invested in a lot of them. And so it's natural, keeps it in the ecosystem, they keep the management fees, and it just keeps the machine moving. Hiten Samtani (26:28) The other part about this that makes all of this work is that real estate assets, asset backed loans are often rated investment grade, which satisfies the criteria that insurance companies have to have. That's kind of the clincher here. Will Krasne (26:39) not saying anything about the quality of this loan book, but like let's ask the folks at Moody's how well ⁓ residential mortgage bonds were rated in 2007. Hiten Samtani (26:47) we don't get ratings, they'll go to Moody's. There's a couple of loans in this book that ARI is selling to a theme that I think we want to get into. Probably the most fascinating capital stack of all time and I don't say that lightly, but the promote we think about this shit a lot. 111 West 57th Street, which is the JDS PMG building. Will Krasne (27:06) You know you have a good cap stack when it takes multiple pages. Hiten Samtani (27:10) That's absolutely astonishing. So, ARI was the lender. I believe they own the mezzanine piece on that one. Will Krasne (27:16) There's 45 loans on that property. Who knows? It's one of them. It's one of the fulcrum securities. Let's just call it that. Hiten Samtani (27:21) So, ARI, I'm assuming after the sale is consummated, they'll ride off into the sunset. Will Krasne (27:27) Well, I'm sure that they'll ride off into the sunset and start originating new stuff. They're selling off the loan book. They'll just go rebuild it, rinse and repeat, as you said. The ARI is an origination engine, and there we go. Hiten Samtani (27:37) Stuart Rothstein who runs that arm set it flat out. said, there seems to be much greater value placed on what we do from an origination perspective in the institutional market than in the public market right now. Translation, being private lets us do a lot more exotic cute things. Will Krasne (27:52) And in the public markets, if you're trading at less than book, I can tell you what, at the end of next quarter, Athens marking that shit to par. That's a big gain. Hiten Samtani (28:01) Athens already become, as we said, an alpha dog in the CRA lending book. It topped CMA's ranking of top insurance lenders two years in a row. In 2024, it originated more than $10 billion, which was up 40 % year over year. Last year, it did one of the defining transactions in the New York market, which was 590 Madison. It originated that loan for Reckler and Elliott Investment Management. It keeps moving up the prestige and scale stack. As we're talking about here, Apollo's kind of getting into every little no-con-crowning of CRA finance. They bought a CPACE lender as well, a topic that I've been wanting to chat about more on the pod. How would you define CPACE? Will Krasne (28:38) Basically extra leverage that's cheap. Apollo is basically created like in the Titanic when you could have four different pockets flood before the whole boat goes down. Athene is just another pocket so ARI is going down and they can just slam the gate, shove it over there and it'll float to the top. Hiten Samtani (29:07) That's it for the Promote Podcast this week. If you get no love in the public markets, there's always a private credit cuddle to be had. ISIS immigration crackdown is breaking the flow in the multifamily market. And Tishman Spire is making another run at a tower where everyone, probably except for Tishman Spire, has been humbled. We'll be back next week with more CRE insider goodness. And remember, right as a review on Apple, Will was hoping to have a fun rendition for this week, but no love. Will Krasne (29:33) Really sad. I was really fired up for this podcast. I have a ton of energy and it's all wasted for nothing. So thank you. Hiten Samtani (29:40) or nothing. A shout out again to our sponsors, Lone Boss and Bravo Capital. Will Krasne (29:45) You can find them at bravocapital.com and loanboss.com. Hiten Samtani (29:50) I will see you next week my friend, thank you. Ciao. Will Krasne (29:52) Thank you.