Latest / The Promote Podcast / Lurin's FBI Probe & the CapStack Snipers
Transcript
- Hiten Samtani (00:03) What you're about to hear is actual promote fan mail. Our listeners know exactly what gets our juices flowing. Will Krasne (00:17) Flash accurate. You guys have touched on multifamily syndicators, but one that is worthy of the story is Lurin and Jon Venetos. He is very different than the other guys because he A had a previously highly successful career and made crazy money, one hundred million plus, and B, he has essentially disappeared. He had massive recourse and a number of banks have judgments interchasing him. But he and his wife and five kids are seemingly gone. I've spoken to some close friends of his and their best guess was that he went to St. Bart's where he had slash has a house. His fall is far more dramatic than the S2 GDAs of the world because he already was so rich and successful, he didn't need to do any of this. Hiten Samtani (00:58) Well this guy's bang on 'cause now the FBI is after him. Will Krasne (01:01) Is it Johnny Utah who's coming after him? Hiten Samtani (01:05) I am an FBI agent. Will Krasne (01:08) Buddy, this is your fucking wake-up call, man! I am an FBI Aaron Krawitz (01:13) Shit. Hiten Samtani (01:22) Welcome back to the promote podcast, your insider guide to the money and mania the CRE markets. I'm Hiten Samtani Will Krasne (01:27) And I'm Will Krasne Hiten Samtani (01:32) A shout out to our sponsors who helped make all this happen. Pencefrit, the only interest rate advisory focused exclusively on CRE. Will Krasne (01:39) Bravo Capital, a leading HUD and Bridge Lender. Hiten Samtani (01:42) This week we take stock of the tale of Lurin and Capital, a multifamily syndicator that's now in the FBI's crosshairs. Jon Venetos was cut from very different cloth than the rest of the Sunbelt Dreamers, and his rise and fall are arguably even more cinematic. Next, it's a classic Manhattan tale of capstack sniping. With 245 Park ready to be graced by a $2 billion Refi, we look back at SL Green's Tranch Warfare at the Skyscraper, and what is already likely a monster payoff. Will Krasne (02:10) You love this story more than I think almost anything. Really happy to dig in on the precipice of what should be a gigantic triumph for our friends at SL Green. Hiten Samtani (02:20) Try telling that to Wall Street though. Will Krasne (02:22) But before we get into all that, it's time for the punch list, our signature rundown of the newsiest news and CRE. This week's punch list is powered by H Equities. Elliot Horowitz's team is your mid-market go-to on both sides of the cap stack. They can do bridge loans of up to 50 million or step up as a co-GP with that final 10 to 20% of equity you need to close. I can tell you firsthand, that is the hardest. Hiten Samtani (02:47) It really is. Check out their platform at h equities.com. That's h equities.com. Okay, first one. 485X. I just never understand the nomenclature of the legislation here. Will Krasne (02:59) Either. I I never really understand even in building multifamily buildings too when it's like 26A-3. Just name it one. So 485X, yes. It's reared its ugly head in quite dramatic fashion. So 485 Fulton Street and 147 Lawrence in downtown Brooklyn sold to borough developers. This site I think could support something like 450, 470 units. Hiten Samtani (03:24) Yes, but if you build a project of that scale, you fall into the prevailing wage requirement, right? There's a forty dollar an hour floor for wages and no one really wants to pay that. Will Krasne (03:35) $40 an hour that gets you like two falafels now in the C port, which I found out over the weekend. Good lord. But you're paying every trade minimum there. And there's obviously quite a bit that would fall below that threshold. So it pushed your costs up all the way. And the math on the tax break just isn't there. This applies only to over a hundred units. And what you've seen a lot of are ninety nine unit buildings. Hiten Samtani (03:56) been a flurry of those kind of filings in the city. It's the classic show me the incentives and I will dot dot dot. Will Krasne (04:01) Yeah, Charlie Munger's rolling over in his grave. So this site, which could be much larger, they're going to build two hundred and ninety-seven units across three separate buildings, and that is an extra 160 units of housing that the city desperately needs that are not going to get built. Hiten Samtani (04:18) It's so nakedly cynical, right? When you see a 99 minute film. Of course. It's just so ridiculous. But I don't know if the city will have a come to Jesus moment and revisit that policy anytime soon. All right. Next one. Jeff Green, by the way, when the real deal mentions Jeff Green, there's almost like an ironclad rule in the newsroom where you have to preface it by billionaire investor. So it's billionaire investor Jeff Green. Kinda like when you anyone mentions Josie Mourinho, you have to say the Portuguese for it. If I speak I am in in big trouble. Will Krasne (04:51) So didn't Jeff Green this is sort of beside the point, but wasn't Mike Tyson his best man at his second wedding? I want your heart, I wanna eat his chill Hiten Samtani (04:59) Yes. Jeff is a pretty colorful character, big palm beach guy, but I think he features very prominently in the broader financial story of our time. Right. Will Krasne (05:07) Right. He is prominently featured in The Greatest Trade of All Time by Greg Zuckerman, great book. Made a fortune in LA real estate, lost a fortune in LA real estate, made another fortune in LA real estate, but made the largest chunk of his fortune shorting C Ds during the Great Recession. Yes. He then reimagined himself as a Palm Beach billionaire and has been doing real estate down there. He was Hiten Samtani (05:30) the Palm Beach billionaire until he got frame mogged by a certain Steve Ross. Anyway, so he's gone and sold the Tide Line Palm Beach Ocean Resort and Spa to Ford Partners for about what, a million to a key? So 150 million. Big, big deal. Will Krasne (05:46) Really big number. He bought the hotel for something like 50 million. He pumped a bunch of money into it. So this is probably not an amazing IRR, but nice phenomenal trade. But the reason I think we're mentioning this, one, and he's used to mention Jeff Greene the billionaire investor Jeff Greene And two, four partners who maybe some of our listeners haven't heard of have sort of flown under the radar, but are building this absolutely massive hospitality portfolio in South Florida. Hiten Samtani (06:11) Beyond South Florida, they own a couple of incredibly dolce vito properties in Portofino, Italy. Norman's Key, is that as good as Liferd Key? I don't know. You tell me. Yeah. Will Krasne (06:20) No, absolutely not. Right now, I'm just saying this: bakers, pick your Bahamian thing. It's not as good as Liford. It's just not. So miss me with like the Baker's thing. Just no. Hiten Samtani (06:32) My bet is that listeners are gonna be hearing a lot more about Fort in the next few years. It's a pretty staggering portfolio. They've been on the forefront of the whole condo buyout game as well in Miami and South Florida. Will Krasne (06:43) about cornering the market in certain categories. They own all four Four Seasons branded hotels in South Florida. They built two of them and then bought the other two. I just think that's very Hiten Samtani (06:53) Cool. Probably someone we should look at a little bit more closely soon. Okay. Next one. Will Krasne (06:59) CBRE industrial management bought tenant equity from Cerberus for one point six billion. This is the fourth or fifth net lease deal I've seen in the last six months. Hiten Samtani (07:11) I think it was Starwood Fine. Will Krasne (07:13) Fundamental inc yeah, Starwood buying fundamental income. So Goldman Sachs just bought LCN maybe a month or two ago for $400 and something million dollars. Carlisle, a couple years ago, bought a huge portfolio of NetLase deals from iStar. And Apollo did a investment in real estate income. So all of these private equity firms are buying into NetLease, which I mean, look, there's there's things about NetLase which are very attractive, which is the consistent cash flows, the contracted cash flows, escalations. credit tenants, long term, what have you, but not sure if anyone's noticed, but rates are through the roof. Yeah. And you can't really increase the value of a net lease deal once you sign the lease. So, you know, in what should be a trickier market for net lease, all of a sudden they're all getting bought. Hiten Samtani (07:59) As you said, the decision's already been made. Will Krasne (08:01) Yeah, I guess so. Hiten Samtani (08:04) All right, next one. More AOM gobbling. So Aries has tied up with the Canadian pension fund PSP, announcing a JV to invest about two and a half billion in logistics. Will Krasne (08:15) And Aries not known as much as a logistics player. The really big ones that have made it a huge chunk of their investment profile for a while. Blackstone obviously has been huge in it. EQT Exeter, I think, fired all their multifamily people and just do industrial now. Aries a little bit less so, but they have their own branded platform now called Mark Logistics, and that's gonna source and manage the assets for the JD. They're seating it with 14 properties, five million square feet in California, Texas, New Jersey. It's important to mention that this is More demand for certainty of cash flow and duration. And so many people have gotten burned on multi that all these other asset classes which have contractual cash flow that multi doesn't beyond a year are becoming more and more attractive. Hiten Samtani (08:55) Next one. So our guy is back, the girthy lad out of Spain, Ponte Gadea, Amancio Ortega's family office or whatever you want to call it, they're spending what two hundred million plus to buy something in Marlabone. Yeah. Which is a posh posh area in in London. They're Will Krasne (09:11) Spending $202 million to buy 219 Baker Street. So Sherlock Holmes was what? It was something something B Baker Street, right? Yeah. Hiten Samtani (09:19) Yes, that's correct. Well, Watson, I believe this case is solved. Well, this is on the heels of a nearly billion dollar purchase in Paris recently. Will Krasne (09:27) Indeed, they spent nine hundred and twelve million last month buying Capital Eight office complex in Paris. We're getting closer to year end and those Spanish taxes aren't going to avoid themselves. Hiten Samtani (09:39) Okay, last one. Our guy, Michael Comparado of Benefit Street Partners, or should I say, formerly of Benefit Street Partners, he's a Will Krasne (09:47) out he is out. Board chair Rich Byrne is coming back as CEO of the REIT. Hiten Samtani (09:52) By the way, I looked at a headshot of him, I'm like, this man has an unusually prominent neck. So I look him up and he's like he's like a gold champion at BJ. Will Krasne (10:02) If he ever gets in a fight, the only guy in Sierra who can handle him is Rob Stuckey at Carlotte. Yeah, Hiten Samtani (10:06) yeah, the the Carlisle. Will Krasne (10:07) it's black belt and judo's next like the ten feet wide. So Benefit Street, which is a huge player, particularly in the you know, syndicated game. Hiten Samtani (10:15) C R E, C L O, CMBS. They recently bought New Point, which was their big splashy acquisition of the agency lender from Meridian. Will Krasne (10:23) Yeah, and Comparado was trying to build a one stop shop and this is quite a surprise. Hiten Samtani (10:27) Quite a surprise to him as well, is my understanding. Not only did they bring Rich Byrne back and they called it a reappointment, the president of FBRT was a guy called Brian Buffone, who's known as Buff. And he was Comparado's college roommate, his longtime right hand man. So he had become president of the company just a few months ago. Right now, they've elevated the CFO of the company to be co-president alongside him, which I think is basically like, dude, you know, this is a a gentle exit. I I don't imagine he'll be around for too long. It's interesting because it kind of tells you how the culture of CRE, which is a little bit more, you know, brash in your face, a little bit more cowboys, can sometimes clash with the culture of broader institutional credit, institutional Wall Street. Will Krasne (11:12) Broadly, it's Franklin Templeton, massive asset manager and owned by the I think the Johnson family in San Francisco. And it's just a different different game. Like when you're doing a lot of long only ETFs. Hiten Samtani (11:27) And as I understand it, Comparado, who by the way, we really enjoyed speaking with, he had built this fiefdom within BSP that didn't have the same patois as the rest of BSP. Will Krasne (11:39) So TBD, what his next act is, but this is the second big change on lenders who are really active in the Sunbelt. Hiten Samtani (11:46) Limekin just sold their fifty percent stake in this MF1 JV to Berkshire residential. Alright, that's it for the punchless. When we come back, it's time to go kicking down some doors. Literally. Aaron Crowitz from Bravo Capital, welcome back to the promo. Aaron Krawitz (12:06) Hi Hitan, good to be here. Hiten Samtani (12:07) The SNF space, which as you know is one of our fascinations, has long been a black hole of data and intelligence when you look to put money to work in these markets. What do you look for as a lender? Aaron Krawitz (12:18) It really starts and ends with the operator. We wanna make sure that the operator is somebody who has extensive track record in the state because every state is like its own universe within skill nursing. And somebody who is successful with six facilities in Minnesota might not be successful with their first facility in Florida. We also want to really make sure they have a staffing plan. Staffing costs are a huge variable item. And then there's an opco and a propco structure for skilled nursing. And for our lending, it's been important to make sure that they're the same and that the ownership has a stake in the opco because we've seen some deadlocks where incentives aren't aligned and it could get very messy very fast. Hiten Samtani (13:04) Aaron Crowitz from Bravo Capital, thanks for being with the promote. We've obviously covered the syndicator boom and bust or rise and crash in quite a bit of detail here at the promote. But there's one guy that we probably didn't give enough coverage to, and the FBI has kind of pressed upon us that it is now the good time to look at the story. So Jon Venetos who founded a company called Lurin Capital, is being investigated by the FBI, according to documents seen by The Real Deal. And pretty stunning stuff. I thought we should get into his background because it is quite unusual. Most of the big guys that we've seen in this business from Alan Stalkup to Scott Everett, et cetera, they were, you know, good old Texas boys who started doing fix and flips and then fueled by ZERP and big dreams, just got big very, very quickly. This guy was not like that at all. He was an actual Wall Street guy. Will Krasne (14:05) He was a director at Thomas H. Lee and then he was the deputy head of Absolute Return Hiten Samtani (14:10) What a great title. Will Krasne (14:11) Strategies Group and senior portfolio manager for the Topieris Select portfolios at Deutsche Bank doing a lot of gardening there, I guess. I don't know. but he joined Citadel in two thousand six. So pretty early on. Hiten Samtani (14:22) If it's six then he's seeing the go go days. He's coming in right as things are getting really hot. Will Krasne (14:28) Yeah, well then right before Citadel almost blows up in the the recession, but then afterwards, you know, came Hiten Samtani (14:33) You live for those little moments of glory right before all that shit goes down. Will Krasne (14:37) He had lot of lot of moments of glory. He was the senior managing director and head of Surveyor Capital, which is their a global equity long short multi-manager strategy within Citadel. That is like enormous job. He was a member of their investment committee. There's random PMs at Surveyor who make like $14 million a year. You can just imagine sort of what the head of that group may. Hiten Samtani (14:58) This is a guy who knows what Ken Griffin's preferred cologne is. Will Krasne (15:04) Flowers from a book. Guys like this found family offices. So this was a real dude. And he'd been doing multifamily on the side for quite some time. You see that a bit because if you're in one of these jobs, you're also often very restricted on what you can buy. So if you're in your personal account, you can't trade stocks in a lot of cases. You can't trade bonds in a lot of cases. And one sneaky thing is where a huge chunk of your comp has to stay in the funds. And invests over time. What that means is you can get paid $10 million a year and like five of it or more, depends on your deal again, stays in the fund. So you can sometimes have dry tax bills where you got this income that you don't have the money to pay because it has to stay in the fund. You know, so in a weird way, you can be kind of illiquid. What that means is a lot of people try to get money out of the fund. Hiten Samtani (15:53) Well, famously Mark Rowan has a little multifamily vehicle on the side. A lot of these guys do. Will Krasne (15:58) If your day job is doing stocks and all of your money is in your fund and that fund goes badly, you get fired and all your money goes away. Yes. Yeah. So people do want to diversify. But anyway, he founded this company in 2016, but had been doing multifamily for quite some time and it scaled quite a bit. What, 10,000 units at his peak? Yes. He was also putting in way more of his own capital because he had more to put up at the start at least. But this portfolio has been seeing stress for quite some time. And he filed for chapter eleven in the spring amid a ton of foreclosures or attempted foreclosures. And he's being pursued personally for tens of millions of dollars in PGs by AQ. Hiten Samtani (16:37) He signed a lot of recourse guarantees in exchange for slightly lower rates and he did that over and over again according to people who know. Will Krasne (16:44) And that's something if you have a real big balance sheet. You like Jeff Sutton signs PGs. Yeah. But you don't really want to make your money food PGs because that's like picking up dimes in front of a steamroller. I say that as someone who signed PGs and again it does make you feel alive. Hiten Samtani (16:59) So he's been pursued personally over tens of millions of dollars in PGs. He's had a lot of foreclosure battles. He's placed a bunch of properties in bankruptcy to stave off those foreclosures. So far, pretty par for the course for a lot of syndicators. But now we have news that the FBI has opened a probe into Lurin Capital and has put out a communique saying, Hey, investors, if you feel like you were scammed by Lurin, please reach out. Will Krasne (17:22) So this is where it gets gnarly because this isn't a my gosh, I bought floating rate debt. Yeah. Your money's all gone. I'm so sorry. This is real crime, alleged crime, like alleged go-to-prison stuff. A former employee who worked in property management claimed Lurin lied on reimbursement requests to lenders by inflating costs of repairs and submitting invoices for work that wasn't done. If you're doing a fix and flip deal like Lurin was doing, in a lot of cases, you're not getting a permanent financing loan. You're gonna get a bridge loan from a lender. And that lender in underwriting your loan is not. Saying, hey, I'm wrong underwriting to a certain DSCR today. What they're doing is saying, you're gonna renovate this property, you're gonna fix this property, you're gonna increase NOI, and then my debt yield is gonna be great, I'm gonna be protected. And one way they make sure you do that is they hold back funds for the CapEx and for interest reserve. And they don't just give it to you. You have to submit invoices. It's just like a construction draw. Hiten Samtani (18:22) Yeah, basically you're saying like, Hey, I've done this, I need X funds for this. Will Krasne (18:26) And in a lot of cases, they're supposed to come out and you have to submit pictures, still do site visits, and that money doesn't go to pay debt service. Other than the interest reserve, of course, that does. But it doesn't go to pay your payroll. It doesn't go to pay your insurance bills. It goes to pay for the capex. That's what you have to do. And in a lot of cases, this can actually be a big problem because the lender can force feed you the capex dollars. So let's say that. Hiten Samtani (18:52) I like Will Krasne (18:53) Your renovated rents aren't where you thought. And you're like, actually, like our ROI on this is bad. We don't want to spend the money. The lender's like, too bad. Barrowed Hiten Samtani (19:00) Well, Will Krasne (19:01) it. You're getting it. And it can cause real problems. So what Lurin was doing allegedly. Allegedly doing, which is super illegal and gets you in huge trouble. He was submitting invoices, fake invoices allegedly, for work that wasn't done. Okay. And saying, please give me the money. A reasonable person can infer that he was doing that to Plug holes in the boat elsewhere. Hiten Samtani (19:24) There's an extraordinary email sent by one of the lender reps after an inspection of one of their properties in Alabama where it said, None of the units inspected are 100% complete as requested in the draw. The roofing line item is ninety-seven percent drawn with no work completed or materials on site. That's not good. Will Krasne (19:43) Very bad. Yes. That's super bad. So this happens in basically every boom cycle. Very famous one down in my old home in Delaware, where one prominent real estate developer went in the bankruptcy that came out of all this, sent a draw to a bank that said, Need a million dollars to pay bar tab. And it got paid. No invoices. Hiten Samtani (20:04) Amazing. Shenanigans would lenders get you dinged. That's the stuff that really gets you. Will Krasne (20:08) trouble. Well, I mean, he doesn't need to worry about his lenders. He needs to worry about not going to jail. Right. So that's not all. He two former employees said Lurin stopped being eligible to offer a four hundred one K plan to employees this fall, but never told the employees. And they provided documentation that shows that their four one K contributions were withdrawn from their paychecks in November but not deposited into their Fidelity Managed four one K accounts. Hiten Samtani (20:33) That sounds like kinda bad as well. Will Krasne (20:36) That's really bad. You can go to jail for that. Hiten Samtani (20:38) As the founder of a relatively new company, I've been told never to mess with payroll taxes. I've been following that advice. Will Krasne (20:44) Yeah, do not mess with payroll taxes. Do not mess with four one K contributions. So this is not garden variety like, I got hit by a bad cycle. I'm coming back. This is a I'm going to a place that may not be extradition friendly with the US. Hiten Samtani (20:57) People suspect that he's camped out at one of his homes in St. Bart. So maybe we should call AB Rosen and see if he's seen him. Will Krasne (21:03) We talk about how we play with live ammo in real estate, and you know, we went through it with the treats a couple of weeks ago. This is something different. Again, all alleged, but if these are proven to be true, it is just actual criminal behavior and stops to be glorified. And it's just again shows that if these cycles are very real, people can be driven to do things you wouldn't imagine by how much pressure there is. Hiten Samtani (21:28) So Lurin filed for chapter eleven, but where does this end for Jon himself? I mean, this could go all the way. Will Krasne (21:34) It's really dark. Ends in a very dark place. And it's already in a pretty dark one. Hiten Samtani (21:39) Just nuts because he was already rich, rich, right? This is the kind of thing that you see near mare. It makes sense to me that someone that with that background could go down that route, right? Came from nothing, saw just unbelievable earth shattering wealth in a very quick period of time, spent it like there was no tomorrow, and then just didn't know what to do and kept plugging holes with you. Kind of see that with people in that situation. Will Krasne (22:02) If you have the money though, the worst thing is losing it. Yeah. There's a moment where you can just cut everything and be like, We're downshifting, we're getting ahead of it and yeah, people do crazy Hiten Samtani (22:11) Lifestyle creep is infinite, right? We've talked about this before. There's no limit to who you're comping yourself up against. JP Conklin, welcome back to the promote. Tell me about the conversations you've been having post-Rate Hike. I would imagine there's been a deluge of inquiry, concern, existential doubt since then. JP Conklin (22:40) The most pressing question is how many more hikes will there be? A lot of the discussion is around, I can probably live with two or three. Anything above that starts becoming pretty painful. And so a lot of the discussion that we're having with customers is how likely is it that we'll see more than 75 basis points of total tightening? And I've been punting on things like selling or refinancing or even hedging decisions because I kept expecting rates to come back down and now I don't know what to do. Hiten Samtani (23:09) But Penceford, you've been a hand on the shoulder for these investors for about twenty years now. What are some of the evergreen reflections you can apply? Because a lot of these people this is their first dance, this is their first brush with this kind of pressure. JP Conklin (23:21) First thing I tell them is the lender requirement shouldn't be their hedging strategy, that they should decide what is best for them and their business independent of what the lender is requiring. From there, let's have a discussion around what are your disposition plans and what is your risk tolerance. If something might cause you to not be able to sleep at night, let's try to eliminate that risk. Hiten Samtani (23:41) JP Conklin, thank you so much for being with the promote. Will Krasne (23:51) So 245 Park is back in the news and this is one of your hobby horses. Hiten Samtani (23:56) I like this building for many reasons. Obviously, the OG reason is it's part of the Euris building portfolio, which was the deal of the century by the Reichmans. This was one of the buildings in that 10 million square feet. but I'm always on the lookout for deals or properties that illustrate the deal making off the time of Will Krasne (24:15) Of the epoch? Hiten Samtani (24:16) the epoch. Exactly. And I think 245 Park does a wonderful job of that. So SL Green. They're nearing a two billion dollar CMBS financing. The path to get here was was gnarly as hell. Will Krasne (24:28) It was indeed. Let's flash forward to twenty seventeen where H A, remember those guys? Okay. Hiten Samtani (24:33) yeah, how could I forget? Will Krasne (24:34) Blimit up kamagazis. Hiten Samtani (24:35) This is one of the greatest terms, yes. They came in hot. They were part of that wave of Chinese conglomerates that just came in pretty hard. Will Krasne (24:43) They did and they paid a massive number for this. They paid two point two billion, which was twelve hundred a foot in twenty seventeen. So this is just a tectonic number. Hiten Samtani (24:53) It just a different time, man. It was a great time in in Manhattan. It was Will Krasne (24:56) That was a different time. Wild. Hiten Samtani (24:58) this is around the time when Anbang bought the Waldorf and all of those strategic hotels. And it's just so much deal making was happening. The Chinese were coming in super hot. At one point, HA owned a quarter of Hilton. This is a company that started off as an airline company and eventually sprawled into this AUM gobbling behemoth. Now in 2017, something very significant back home happened in China. Will Krasne (25:22) China began cracking down on what do they them? Hiten Samtani (25:26) Grey Rhinos. Will Krasne (25:31) Ray Rhinos. Hiten Samtani (25:34) I guess there's a black rhino in Africa because the horn is very valuable medicinally. Okay. But gray rhinos were so called because there were these large, fast moving companies that were basically dangerous in plain sight, and the Chinese government felt like if these companies go down, it's going to be destabilizing for the Chinese economy at large and also embarrassing on the world stage. As Maggie Thatcher said, you know. Will Krasne (25:58) When the state does everything for you, it'll soon take everything from you. Hiten Samtani (26:02) It cracked down pretty hard on the Grey Rhinos and really limited their deal making abilities. Will Krasne (26:07) Amidst that backdrop, we got the gray rhinos, but then we got the green sharks. SL Green Hiten Samtani (26:14) There was a young pup called Harry Sidmer who was starting his rise at the time. Will Krasne (26:18) They came in for a prep position in the middle of twenty eighteen and I think they spent what a hundred and fifty million dollars. Hiten Samtani (26:24) Yeah. And importantly, at some point, unclear when, they also took a forty-nine percent stake in an entity that owned half the Mes on the building. Just to give you a sense of the debt picture on this building, H A had got a $1.8 billion financing package at the time of the acquisition, which was a mix of CMBS Senior and Mezzanine Financing. Will Krasne (26:44) Important to note, they took over building management in Leasing. Yes, they did. And that's gonna come into play later. Hiten Samtani (26:51) At the time when they did this deal, this is the CEO of H A's North American subsidiary. SL Green has an unparalleled track record in managing top commercial assets throughout New York City, attracting world renowned firms and offering best in class building management. Will Krasne (27:06) Not wrong. Hiten Samtani (27:07) Not wrong. But when they came in, they also negotiated some pretty stringent protections around bankruptcy, maybe sensing that something was about to happen. Will Krasne (27:16) Why would they Brian Windhorse face, why would they do that? Hiten Samtani (27:21) In twenty twenty one, after this crackdown on Grey Rhinos and after all these liquidity issues that resulted for these Chinese companies, H and A was over. They declared bankruptcy and the entity that controlled the Tower hundred forty five Park also declared bankruptcy. Will Krasne (27:36) And SL Green went to arbitration. They're claiming they were owed repayment of that pref plus interest. So something like $185 million. And amidst all of this, too, the biggest tenant in the building was Major League Baseball. Mm-hmm. And Major League Baseball left. And so H and A, of course, is looking at, you know, the best in class building management, going, Where's our anchor? Hiten Samtani (27:57) I'm not a baseball guy, but for some reason SL Green was allegedly slow off the mound. Allegedly. Is that the right thing? Does that work? First. Will Krasne (28:07) Slow getting over to cover four. Hiten Samtani (28:08) H A was alleging that they were like hoping nothing good would happen because the tower would fail. Will Krasne (28:13) There's always the power of incentives, right? And if you own the Mes and you're managing the building, it's not the worst thing in the world if it's hard to find a new make or tenant. No conflict, no interest. Hiten Samtani (28:23) So SL Green and H A are going to war in arbitration. SL Green prevails. H A is ordered to pay them one hundred and eighty five million. Obviously at the same time, SL Green controls the Mez. So as things go south, SL Green takes over the tower in twenty twenty two. Will Krasne (28:38) And very importantly, they are able to assume that financing that one point eight billion of financing, which I think was like a four and a quarter, four three, four, four interest rate. Hiten Samtani (28:49) Quite nice. So what does SL Green do in this situation? Do we want to just take a crapshoot on what their overall basis was on this tower? Will Krasne (28:56) Well, I mean if you include the debt, they're assuming one eight, they've paid one fifty. Mm-hmm. And if they got repaid that, I mean they're in it basically for free. Like they're in it for one eight. So, you know, four hundred million dollar haircut. Hiten Samtani (29:10) And then they bring in their friends from Japan. Mori Trust, not to be confused with Mori Building Company, comes in at a two billion dollar valuation, de-risks the deal almost instantly. Will Krasne (29:20) When SL Green took over the property in twenty twenty two, Cinemer said in a statement that the property was the company's next major development project, following in the past of one Vanderbilt and one Madison. They planned a pretty big repositioning, altered the lobby, plaza, retail, and infrastructure, and then we're bringing in its amenities package to the building. And Cone Peterson Fox was helping with the redesign. Pretty, pretty swanky stuff. They got in this for 148 million in cash in twenty eighteen. They got That and more back and they owned the building. And then they got recapped. So pretty good deal. Hiten Samtani (29:54) Good. These are the kind of deals that don't just come along, you have to engineer them. That's what makes them so much more interesting than just the standard acquisition. Will Krasne (30:02) We had a hard enough time explaining this. Like, imagine the stock market trying to figure this out. Hiten Samtani (30:10) That's it for the promote pod this week. A syndicator with the rarest of all things, a personal balance sheet, is facing some serious FBI heat. And a Manhattan skyscraper's upcoming $2 billion refi is the perfect excuse to revisit the Capstack sniping that really defines this market. A shout out to our sponsors who help make all this happen. Penceford, the only interest rate advisory focused exclusively on CRE, Penceford.com. Bravo. Will Krasne (30:35) Capital. Hiten Samtani (30:35) You can find them at BravoCapital.com. Will Krasne (30:38) And age equities. Hiten Samtani (30:39) Which you can find at h equities.com. Between the Reichmann 3-pack and the break, it's been a minute since we did a couple regular shows in a row. It feels nice. Will Krasne (30:47) back back in the New York Groove. Yeah. And stay tuned for our first live show coming soon. Hiten Samtani (30:53) Indeed. I am so excited. we'll have more details ASAP guys. Just bear with us. Will Krasne (30:58) Also, we're getting more into Instagram because we're old guys. So follow 1031 TV. Hiten Samtani (31:05) Yeah, it's not the best handle. We're working on it, but for now, please follow at TEN31 TV. We're gonna have insider content, behind the scenes. Will has started doing these very adorable walkthroughs and sp specifically Alormanat for now, but follow us, follow- Will Krasne (31:20) him I've gotten a lot of new followers recently, at least for me, I have a small account. And she was like, Are there you know, are you getting like hot babes? And I was like, I'm getting Hasidic guys from New Jersey. Hiten Samtani (31:32) All right. Thank you. I'll see you in a couple. Will Krasne (31:35) Thank you. Hiten Samtani (31:35) Ciao.