Latest / The Promote Podcast / Tupac vs Biggie, CRE Edition

Transcript

Tupac vs Biggie, CRE Edition · The Promote Podcast

• Hiten Samtani (00:03) There are two places in America that embody the lifestyles of the rich and famous above all others. One's obviously Manhattan. The other's Beverly Hills. The deals are bigger, the shopping's swankier, the glitz, the glamour, the scandal, the risk. Everything is magnified. So it stands to reason that the deals in both places are as high stakes as it gets. Will Krasne (00:22) paraphrase the inimitable Kevin Kisner, developing in these markets ain't no hobby. Hiten Samtani (00:31) Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani Will Krasne (00:37) and I'm Will Krasne Hiten Samtani (00:39) Today we're going Tupac and Biggie, CRE edition. We dive into a deal on each coast that brings together all the things that we think make CRE the greatest show on earth. Rupacious lenders, billion dollar dreams, broken capital stacks. Will Krasne (00:52) And of course, Russian developers who bear an uncanny resemblance to Ivan Drago. Hiten Samtani (01:01) I totally see it, I totally see it. In New York, we're talking the saga of 172 Madison, how Yitzchak Tessler lost his trophy condo project. That was my pick. In Beverly Hills, we look at One Beverly Hills, the multi-billion dollar mega project that's a who's who of finance, real estate, hospitality, and so much more. That was a Will Krasne pick. We want to shout out our sponsor for this episode, Bullpen, their recruitment shop dedicated to CRE. You'll hear more on them in a bit. Will Krasne (01:29) We're gonna start with some California love or Brooklyn's finest. Hiten Samtani (01:33) You wanna flip a coin on it? Will Krasne (01:35) Let's do it. Hiten Samtani (01:39) Tails it is, baby. Let's go New York. All right. There's a fascinating nexus between the diamond world and the real estate world that we've talked about before. Go check out our episode on Gary Barnett where we gush about this nexus in depth. But there are probably in the Venn diagram of diamonds in development, there was also a few less celebrated characters. Characters that are equally larger than life, both literally and figuratively. I'm referring here obviously to Yitzhak Tesler. Will Krasne (02:05) Like all great characters, the backstory here is amazing. He started off as a, you on the floor of like the diamond exchange and ends up with at one point the most expensive listing in Manhattan, aspirational pricing be damned. Hiten Samtani (02:20) Yeah, it's a pretty incredible story and I think it illustrates how things can go so wrong and ground up development. The rewards can be outsized, but things can go really, really off the rails. Will Krasne (02:30) It's also a great example of the old wisdom that time kills all deals because it's very much true. Hiten Samtani (02:35) Yeah, it really went through a bunch of cycles. Will Krasne (02:37) Let's give a little bit of background because in New York there are these guys who show up often with great suits, often with great hair. I'm referring of course to Joseph Benanati and try to develop a crazy condo project. You think, that was going to go badly the whole time. This guy was not that. He had a bunch of successful projects under his belt before going to 172 Madison. Hiten Samtani (02:56) He a track record. So Tessler was a very, very interesting character. He started his career as a diamond polisher in Israel. Will Krasne (03:05) It's like starting off in real estate as, you know, the coffee boy. Hiten Samtani (03:09) It kind of is. And at some point he graduates to become a real player and he is traveling into war-torn Angola to trade diamonds. And there's an amazing anecdote. He's talking about lying in his hotel room at night and just listening to gunfire because it was civil war, all kinds of coups going on. And this guy, you know, guy, rotund, really, really character. Ruben Hesk. And he's sitting there and he's like, you know, in those countries. life is worth less than the ash in this ashtray. And he gestures over it. Will Krasne (03:43) It's really like a mix of Lord of War and Blood Diamond. He was involved, I think, as an LP in 66 Leonard, which was a real project and very successful in the early 2000s. He had a real office and he'd done several pretty large, relatively condo deals. this again, this is guy who has developed, he's got sharp elbows. Hiten Samtani (04:05) think it is probably useful to talk about how these two professions are kind of the same thing, if you think about it. Will Krasne (04:11) especially condo development where you have something that throws off zero cash. And it is completely reliant on what someone's going to pay for it. And you have to buy this raw thing and you fine tune it and you develop it. Hiten Samtani (04:24) kind of like a development site, right? Your rough gemstone is kind of like a development site. You have to make an early decision about which path to take it. You're using leverage, you're using brokers, and then you have to bring it to market and hope that someone's going to pay a ridiculous price for it. That's the game. Will Krasne (04:40) If you're working on it and you hit it little bit too hard, can just crack. Hiten Samtani (04:43) Exactly. That's a little bit of context on Tessler. Let's start in 2007. The go-go days pre-Tesla at the site on 33rd and Madison. There is a Russian woman who comes in, Natalia Pidogova. Will Krasne (04:57) ⁓ man, a riddle wrapped in an enigma if there ever was one. Hiten Samtani (05:03) So, Piragova comes in, she buys a site at 33rd and Madison for 33 million bucks, and the idea is to create a 100 key boutique hotel and a 69 unit condo. Girl, grow up well. And she's looking, targeting a pricing of 2,000 a foot here, which is pretty ambitious for this area. Will Krasne (05:13) Nice. What's funny is today that basically gets you a ⁓ second floor walk-up unit in Clinton Hill. At that point, this was staggering pricing per foot. For those who aren't necessarily as familiar with New York, you might think Madison Avenue, that's a very big fancy place. Surely there must be tons of wonderful condo buildings in there. They're not. It's office. It was called Mad Men because they had an office there. Nobody lived there. Hiten Samtani (05:45) And so, Pierogova gets a $29 million loan from UBS for the acquisition and gets started. Things go south pretty soon after. Will Krasne (05:54) The recession hits and development is stalled as development is a want to do. And our good friends at UBS. Hiten Samtani (06:03) They filed a foreclose on the property after Birgova defaults on the loan. And you'll love this. They go and sell the note to a distressed debt investor called Garrison. It's run by a guy called Joseph Tanze and it's an offshoot of Fortress. Will Krasne (06:16) Which I love because a garrison is a fortress of sorts. Hiten Samtani (06:20) This is a really dire situation for Bergova and she's looking to save the site. Somehow she's connected through this guy called Kashi of Platinum Properties residential brokerage. She's connected to CIF. Will Krasne (06:32) They took advantage of my old pal Harry Mackleough. The CIM, who are, they have been involved in many of the most high profile New York developments, these guys are like literally paratroopers. Hiten Samtani (06:43) 432 Park Avenue, 737 Park, 100 Parklee, big, big, big time projects. Will Krasne (06:48) They are very big structures alpha. They've done tremendously well on 432 park, unlike the aforementioned Harry Macklau. They are also very sharp elbowed. And also at some point, I think they realized why do we need this riddle wrapped in an enigma. Hiten Samtani (07:03) Exactly. So what Piragova was hoping for is to JV with CIM and basically get rid of her troubles with her NPL. However, she later alleged that CIM used that inside track with her where she submitted details of the plans and kind of gave them a secret sauce. And they just basically pushed her out. And the way they did that was they bought the NPL, the non-performing loan from Garrison, which puts them in pole position to take the site out, you know, with or without you, they chose to go without her. Will Krasne (07:31) Let me get this straight. The developer who is in foreclosure is like, have a super secret plan that is going to solve this. And this multi-billion dollar private equity firm that's developed way bigger projects, they are only going to be successful if they have my super secret knowledge that has led to this car crash. Hiten Samtani (07:49) That is precisely right. They have a history of doing this. They're happy to take over projects because they actually know how to develop. Will Krasne (07:55) mess with the bull, you get the horns. Hiten Samtani (07:57) kind of running out of options and then comes in our boy test. Will Krasne (08:00) Riding in on his high horse with two cigarettes in each hand. Hiten Samtani (08:04) He agrees to form a JV with Piragova and he agrees to pay off CIM, make them go away. At this point, CIM says it's owed 55 million bucks. So there's already a nice return in there for that. Will Krasne (08:15) Default interest is a hell of a thing. Hiten Samtani (08:17) So Tessler becomes the front man of this project. He's now calling the shots. He is pegging this to be a $300 million project. Will Krasne (08:25) So he takes over, starts doing his magic, shaping the diamond. Things are off to a good start, and I think you have some first-hand knowledge of how good the start was. Hiten Samtani (08:34) We'll get to that in a second. But before that, we should talk about the construction loan. yeah. So in 2014, Tessler lands 140 million odd in financing. What is notable here is that the LTC, which is loan to cost, is 85%. We used to be a country. One little nugget on this, the debt broker on that transaction was a guy called Adi Chugh. Adi, obviously now, is a big lender in his own right. He runs Tyco Capital and he got that sweet Elliott money to bankroll that thing. Will Krasne (08:48) we used to be a country. And he is doing every project left and right in Manhattan, Miami. Hiten Samtani (09:07) feel like he's building half of Miami, it's pretty nuts. So in 2016, the Afro Mention Party, I go in, wide-eyed reporter, and I go up to this beautiful building in the sky. The sunset is hitting just right. The booze is flowing. There's women, there's music. There's Tessler, there's rotund man sitting with a couple of women, smoking his cigar, living the good life. And you're like, this project, this feels right. This project is gonna be something. I also spotted Ryan Serhant there. That's going to become relevant in a little while. This is a party in that like go-go Manhattan way. We're going to break records. We're going to have the best time ever. We're going to create a new neighborhood, et cetera, et cetera. And at the time, think sales were going well. Let's talk a little bit about the condo sales velocity and how important it is to keep everything going. Will Krasne (09:39) free white hair. It's everything. that construction loan, those things are price wide because it's the riskiest piece of debt you're going to have in the project. so every day that goes by, you are burning interest. Again, there's no cashflow from this thing. So it's not like you've got a debt surface coverage ratio. You pay it off by selling units. Hiten Samtani (10:17) You can't even rent the porta potties to the Port Authority or anything on the side. Will Krasne (10:20) You need to build it fast and you need to sell it fast. And generally speaking too, condo projects aren't huge multiples. They're about velocity. You want to be in and out and make a one eight whatever and call it a day. And all of that profit is generally in the last 10%, 15 % of your units. They're generally your best units, your most expensive and you've paid off your construction. Hiten Samtani (10:44) Your penthouses, your top floor units, that's kind of where you make your nut. Will Krasne (10:48) Exactly. So you want to get everything else through there, build velocity. Hiten Samtani (10:52) and then crescendo in that penthouse. Will Krasne (10:55) Precisely. And so they seem to be on their way. They had a great start. Reportedly about a third of the building was under contract within four months. Hiten Samtani (11:03) In 2017, we learned that they got a condo inventory loan. And the size of this condo inventory loan is maybe your first sign that things are a little bit here, $164 million. And the lenders on this are Deutsche Bank and TPG. Will Krasne (11:18) Yeah. So condo inventory loan is essentially a slightly cheaper form of financing that you can use to take out your construction loan, finish the project, and then sell your units. It's rare to have a condo inventory loan bigger than your construction loan because it means you haven't paid down anything or that your costs have ballooned out of control and you've got to, you you the money to finish units, which seems to be the case here. Hiten Samtani (11:32) Exactly. Probably a little bit of both here, who knows? Yeah, a little colom- Will Krasne (11:46) ⁓ What's funny too is that you now have a lot of people on the record who both were involved in the building and weren't on the sales side basically saying that this thing was a tire fire on the sales front. Hiten Samtani (11:57) So Compass was handling sales at the time. 2017, they said 60 % of the units are in contract and the remaining listings were asking about $2,200 a foot. However, there was a lot of, let's put it charitably, mismanagement off a process that needs to be... Will Krasne (12:11) New development sales, everything's orchestrated because there's a bunch of different phases and you have to get them all right to have a successful project. You have to have market penetration. got to, people have to know what the product is. They have to know sort of what the lifestyle it is that you're selling at this price point. And all of that comes from the brokers and the marketing staff. And those guys are machines. They are calling everybody. They are really setting the stage for what people are buying into. Think of the guys we've talked about previously on the show like Michael Schvoo. Like that guy had nine phones. He was everywhere all the time. Hiten Samtani (12:46) It's a 24 seven job. almost think of it like, I know it's a little bit nuts to say this, but I almost think of it almost like a iBanking process. You're an investment banker underwriting a company. It's all hands on deck 24 seven for that really, really intense period. And that's how I feel about new development sales. The best of them run that shit as a real process. The sales, the media generated, the right kind of buyers, the right leaks to the press. creating more excitement, the showings, all of it has to happen. Boom, boom, Will Krasne (13:16) And you have to do it correctly. Like this showing themselves, like which units do you go to? What's the spiel? It has to be incredibly well-choreographed. And think it's a great point saying it's like taking a company public. That's what you're doing here with a building. You're taking a building public. Hiten Samtani (13:29) But on a roadshow, one thing you should not do is mischaracterize the neighborhood. Will Krasne (13:33) Yeah, there's a game people play where you can pick, especially- Go to street easy and lobby to be in a different neighborhood. If you're in Chinatown, but you're like a street over, you can be like, we're in Tribeca. Hiten Samtani (13:37) You are now now now Zeckendorf's 520 Park Avenue is not really on Park Avenue. Yeah, they did some jiu-jitsu there. Will Krasne (13:52) So here, like this building is in Midtown South, which is not very desirable residential area. They should have tried to get it to Nomad. is a very desirable area to live. Hiten Samtani (14:04) Sure, but they didn't. They just called it Midtown South in the list. Minor detail, but these kind of things do matter at that level. It's very, very high-stakes sales and every little thing has to be right. Will Krasne (14:06) still like, hey, it's Midtown South. If you're searching by neighborhood and you want to live in Nomad, it doesn't show up. Like, that's a problem. Hiten Samtani (14:20) One of the issues here is that instead of using kind of your go-to new development brokers, there's a little bit of nepotism in the mix too. ⁓ Will Krasne (14:28) his son to lead sales. And he's done a bunch of those over the over the course of time. So this is not anything out of the ordinary. But for project like this, it's a different ball of Hiten Samtani (14:39) So in 2018, sales really haven't hit the marks that they were hoping for. And Tessler has to go back to Deutsche Bank and scores a $95 million refinancing. By now, Compass has dumped him. You kind of get a sense that this is not going as well as you'd want. And another thing that we should talk about is like, velocity matters so much here because buyer tastes change over time, market conditions change over time. Like you're going through a couple of mini cycles in this one sellout. Will Krasne (15:05) That's a great point. You also face competition that you could be early, but if you take forever, then you're late. And you're not just competing with product here, you're competing with all of the billionaires' row product. You're competing with downtown becoming a hot area. And so a lot of boutique condos down there, which took buyers who might have otherwise looked at this. The longer you're in the market, obviously, the more time works against you from a financial returns perspective. But it also works against you just in terms of, as you said, tastes. You just give yourself more time for things to go wrong. Hiten Samtani (15:37) You just don't want to be seen as a stale building or an unwanted building. Everyone wants to get into the building that you can't get into. ⁓ Same principle. So in 2019, the developer tries a Hail Mary and it is called Le Penthouse. What is Le Penthouse? Will Krasne (15:44) percent It was white box space, essentially means you pay an absurd amount of money for the privilege of then paying more money to finish it out according to your taste, which is maybe it works for office, but for $98 million condos, less so. It looks like a crime scene that like we're dexterous about the murder people. Hiten Samtani (16:14) This is why you're the go-to. I'm gonna read you the listing. If this is how you love to live, this is your call to action. Will Krasne (16:23) that makes absolutely no sense. ⁓ Hiten Samtani (16:25) Early buyers didn't go for it because by the next year, Tessler was forced to slash prices not only on Le Penthouse, but on a bunch of other units. And then things started getting really bad. Will Krasne (16:34) In 2022, the lender DB still on their $95 million refinance declares them default. And then Tessler takes three years to try to get a refinance done and isn't able to do so. Hiten Samtani (16:48) So in 2024, we have our NPL snipers come in, a company called ArcPE. It's led by a couple of guys called John Olsen and David Gordon. They snap up the note in January 2024. And then they're gonna move to file foreclosure. Will Krasne (17:01) It's also illustrative to look at the sort of sliding scale down the lender ladder over the course of this project. We started off with UBS, you an enormous money center bank. Then we go over to TPG and Deutsche Bank. Then we go to ArcPe who, God love them, never heard them before. Hiten Samtani (17:15) TPG. Exactly. So in the summer of 2024, they're about to kick off a foreclosure sale and minutes, I mean minutes before the sale happens, Tessler plays the B card, files for bankruptcy on the project. Will Krasne (17:38) He's a broken hero in a last chance power drive. Hiten Samtani (17:42) ArcPe claims that this filing was done in bad faith and they intend to fight it vigorously. Testers people, however, insist that these units, they're too good to head down the fire sale route. We need time to figure this stuff out. Le Penthouse becomes Le Petit Penthouses. They chop it into five units. That's the plan. Will Krasne (17:59) We've got what 12 units left out of the original 72 so they're like 80 odd percent sold but again like that's the profit that we're still waiting on Hiten Samtani (18:09) When he files for bankruptcy, we kind of get a rare glimpse. It's really hard to figure out in New York and in development in general, who owns what until you file for chapter 11, because then you've got to lay all the cards out on the table. so Tessler owns just 10 % of this project. Pirogova, the Russian developer we talked about in the beginning, owns 40 % and there's a couple of other entities. One of them is called Samogor and the principle of that had pled guilty in some healthcare fraud unrelated. Will Krasne (18:36) I'm like surprised that Steve Ballmer didn't have Kauai Lander in his cap sack. ⁓ Hiten Samtani (18:42) In August, Tessler files for bankruptcy again. This is pretty amazing. This time, the entity that actually owns the unsold units filed for bankruptcy. The previous bankruptcy we talked about, which was just a couple months prior, was by an entity that owned a stake in this entity. Will Krasne (18:58) Incredible. Bk squared. Phenomenal. Hiten Samtani (19:01) It's Russian dolls all the way down. So Tessler says about his his now lender, he says a ruthless company, all they do is buy loans and foreclose. And he says that the outstanding debt on the property is just about 33 million bucks. But ArcPe says that it's nearly double that by now. Will Krasne (19:17) Again, default interest is a hell of a thing. Hiten Samtani (19:19) And Olsen, ⁓ the RP guy says that, Tessler, you know what, you've had three or four years to sell everything, you haven't done shit. In response, what does Tessler say? He says they can go fuck themselves. This winter, Tessler is in a pretty tight state of desperation. He says in court, I can't even pay my credit card. And he asks the judge to unfreeze his accounts. Will Krasne (19:38) not being able to pay your credit card bills like that's know kind of par for the course in real estate. Hiten Samtani (19:44) I'm thinking of Kent Swig. I'm also thinking of my brother Will Krasne. It's happened to all of us at some point. But this frozen bank account situation stems from a separate dispute on the same project. Terzi, Jack Terzi, do remember that name? Will Krasne (19:48) You're do. 23 wall the real heads now Hiten Samtani (20:00) Exactly. at some point, Jack Terzi was going to buy a slice of the Deutsche Bank debt. Tessler, however, convinced him not to do this and said, Hey, you know what, that deposit you made to Deutsche Bank, I'm going to cover you on that. I'm going to refund you that money, which was three million odd. Will Krasne (20:14) That is psychotic. Hiten Samtani (20:17) The pressure to repay Terzi would kind of mess up the bankruptcy reorganization is what Tessler argues in court. And then he also says that he is the project special sauce. If he is removed from the project, the entire thing's going to suffer. get into my office, it takes a key, he says. To get into my head, it takes two years. The bankruptcy judge was similarly confused. He said that when Tessler was being grilled about the project, Will Krasne (20:36) What does that even mean? Hiten Samtani (20:42) He demonstrated that his grasp of specifics was quite limited. I love the put downs in the cloak. They're just at another level. In the spring, Tessler and ArcPE kind of meet somewhere in the middle. He agrees to turn over some of the Rezzi condos and two commercial units. And Ryan Serhat, remember him? He's gonna be selling them for ArcPE. Will Krasne (21:01) Expansion always and always. Hiten Samtani (21:03) in all ways. And Tessler though, he isn't done. He's trying to figure out this. has one last trick up his sleeve. Will Krasne (21:09) He says he's got a co-developer who will guarantee... It's hard to understand exactly what the mechanism here was going to be, but they were basically going to guarantee the loan and that would buy him time to finish the penthouses. And then they were going to have a sort of money back. It was basically like a liquidation preference and a VC deal. Hiten Samtani (21:29) This did not take unsurprisingly. Will Krasne (21:32) Shockingly, the last-ditch, insane plan didn't work for guys at 10 years to finish this thing. Hiten Samtani (21:38) And so Tessler goes and tells ArcPe, I'm out of options, I couldn't get this done. And in August, a federal judge affirms the bankruptcy reorg. Tessler loses all the remaining units. ArcPe is going to sell them. Apparently there was a party for this project that Tessler was not invited to. That's pretty dark. Will Krasne (21:55) Speaking of dark, we talk a lot about successful developers and folks who knock it out of the park, reimagine the skyline, all these things. This is a real situation. If you're playing this high wire act of NYC development, like sometimes you fall. you know, Tessler said something that really stuck with me in court. He said, I've built many buildings in Manhattan. It's not the first one. It's unfortunately the last one because of this situation. Hiten Samtani (22:25) You feel for the guy man? Not so lecker. Will Krasne (22:26) You do. so much. Hiten Samtani (22:37) So we talk a lot on the show about how CRE is such a specific, weird world unto itself. So when you're talent hunting in the space, it makes sense to partner with a recruiter who lives and breeds it. That's where Bullpen comes in. They're a talent shop solely dedicated to the commercial real estate industry. They can hook you up at all levels, from analyst to C-suite. And they can fill both fractional and full-time positions. Check them out at bullpenre.com to get started. That's bullpenre.com. And please, tell our friends there that the promo sent you. Will Krasne (23:14) Regular listeners will know that a couple things really get our juices flowing. Creative capital stacks, when developers score money for their big bets in unorthodox ways, and when we have great characters to introduce to the Promote Cinematic Universe. And man does this story check all those boxes very, hard. Hiten Samtani (23:33) It has everything. mean, when we started reading on the backstory of this, it's amazing how many names came up, not only from real estate, but from like celebrity, Hollywood, finance, everything. It's just a beautiful narrative. Will Krasne (23:44) This site has an incredible backstory, which was detailed in incredible style by Behind the Hiten Samtani (23:52) Shout out to Behind the Deal. Listen, if by any chance you're listening to this podcast or someone sent it to you and you want to come on and be with us and pod with us, we would be honored. We're big fans. Will Krasne (24:03) This originally was the Robinson May department store in its phenomenal location right off of Santa Monica and Wilshire. Hiten Samtani (24:13) Yeah, prime, prime, prime, prime Beverly Hills. Will Krasne (24:15) Yeah, next is the Beverly Hilton, which we will talk about in a minute. It was owned by Equitable Life Insurance. They wanted to sell it and it was bought by two enterprising young bucks. Hiten Samtani (24:24) So, New Pacific Realty, it's run by a bloke called David Margulis, who used to be Apollo's guy out west, by the way, and his partner, Arnold Rosenstein. Will Krasne (24:31) which is just the most Beverly Hills name of all time. Hiten Samtani (24:34) So they pay what? $33.5 million for this dirt. Will Krasne (24:39) Yeah, that's really cheap. it was in a sense, because it was a big piece of land in prime, prime, prime Beverly Hills, it was also a sub two cap because Robinson May had a 30 plus year lease for essentially no money. Hiten Samtani (24:54) at Robinson's May, it's the biggest of the season. So you're buying it on a hope and a prayer, basically. That's what you're doing. Will Krasne (24:59) Kind of. mean, we talked about billionaire developer Ben Ashkenazi. Hiten Samtani (25:04) Massive air quotes. Will Krasne (25:05) Yeah, what he did on Barneys where he did basically the same thing. He bought the ground lease before it reset at a very, very low cap rate and then ended up getting foreclosed on. That's an example of, you know, it's basically like when keeping it real goes wrong. And this is an example of when keeping it real goes extremely right. So Robinson May, their parent company, ended up getting bought by Federated Stores, which is like an 80s LBO target. Like you read about it and they took it over in a 17 billion dollar transaction, which like again, like Imagine a retail deal for $17 billion today. It's kind of unfathomable. But they had a competing department store chain to Robinson May, and they had two stores within walking distance of the Robinson May here. They ended up terminating the lease. so our good friends Arnold and David Margulis own this site now, maybe the best development site in Beverly Hills. Hiten Samtani (25:45) So one had to go. I don't even think you need to say maybe because the price they got in 2007 makes it definitively the best site, at least the best deal of all time for them. So they sell this in 2007 to the Brothers Candy for half a billion dollars. It's 60 million plus an acre. an astonishing return. Incredible. 33 and half million in 2004 sold for 500 million in 2007. Will Krasne (26:23) just a couple of renderings from Richard Meyer. That's all it took. Hiten Samtani (26:27) So the lads who are the Brothers Candy are behind a lot of listeners will know them as the guys behind One Hyde Park, which is basically London's billionaires row, alpha development over there. It's famously the dark building where it's all absentee buyers and whatnot. Will, this seems like one of your obsessions. You probably know a lot about the Brothers Candy. Will Krasne (26:45) I love these guys. were like, yeah, we started off, we renovated like one house, like we live a flat, sorry. And we lived in it and like did it ourselves and then, you know, sold it. And then like three years later, we were billionaires and they, think, I can't remember whether it's Nick or Christian owns. Yeah. Yeah. Owns like the most expensive house in Monaco, like we're just saying something, but yeah, they were the Tiffany brand of Hiten Samtani (27:03) demogles Will Krasne (27:12) New York real estate as ⁓ Lori Lustig Bauer said when they purchased the site. Hiten Samtani (27:18) Candy and candy in the UK is what Tiffany is to jewelry here says Laurie Lustig Bauer. Therefore they believe they will achieve record prices for these condos. That didn't turn out that way. they take on 300 million plus in debt from Banco and Bursa, which is a Mexican bank controlled by our boy, Carlos Slim. Will Krasne (27:26) Just fantastic. one of the richest men in the world and yet another fantastic character involved in this saga. Hiten Samtani (27:41) they default and then who comes in? Will Krasne (27:44) in Wanda, which again, like the real psychos will know that name. Hiten Samtani (27:48) 100%. So Dalian Wanda is one of those emblematic, they're called in China, gray rhinos, these companies that fueled by corporate debt back in China grew super fast, bought up all these trophy assets. This is in the same category as H &A, Anbang insurance, et cetera. And a lot of people are like, oh yeah, the Chinese are a bit different from the Japanese in the eighties. The difference was the Japanese guys didn't go to prison and a lot of the people from Anbang, et cetera, like you don't even know where they are anymore. Will Krasne (28:18) History doesn't repeat itself, but it sure does rhyme. So, Dahlia and Wanda paid about 400 million, I wanna say in like 2014-ish. Hiten Samtani (28:24) Isn't it amazing that we haven't even talked about the deal yet? We're just talking about the dirt. It's just so fascinating. It's amazing. Will Krasne (28:29) So they bought it and then they turn around and sell it in 2018 to Cain International and Beny Alagem So this is where we want to get into the go a little bit down the street. Hiten Samtani (28:41) Do it. Will Krasne (28:43) So Beny Alagem what a character, just like, again, only in America, only in Los Angeles, only in Beverly Hills. So he was a co-founder of one of the early semiconductor companies in the 70s, then started one of largest computer manufacturers in the 80s, was called Packard Bell, not to be confused with Hewlett Packard. Resigns and he can dispute with one of his co-founders, but has made, know, gargantuan amount of money. When you may have a gargantuan amount of money and you're a young enterprising man about town and you want to build a profile, what do you do? Hiten Samtani (29:11) You buy the swankiest hotel you can in Beverly Hills. Will Krasne (29:13) Absolutely. So in 2003, Beny bought the Beverly Hilton from Merv Griffin, another character like Google Merv Griffin, like the Wikipedia page is like 15 pages long. Hiten Samtani (29:25) I mean, deservedly, this guy's a freaking legend. And so was the hotel. This hotel is so deeply enmeshed in LA culture and entertainment culture at large. Will Krasne (29:33) It's where they have the Golden Globes every year. It's in like James Elroy novels about LA. It's like a major scene. So he pays $134. It was a little tired. He spends $90 million renovating it. It's really like one of the iconic West Coast hotels. And what he got with it too though is he got some land next to it, which is again, prime, prime, prime, prime, prime, prime, prime. And what he ends up doing is he gets in with the Guggenheim boys, the Gug. Hiten Samtani (29:58) Let's talk a little bit about them. So Todd Bollie is the former president of Guggenheim. He actually created the credit division there. And then he's since gone on to run Eldridge, which is his giant, I don't know, AUM Goblin Company. Let's just call it. Will Krasne (30:13) I think it's a box of sorts. will say like Todd is investing everything all over the place. Chelsea Football Club, Hollywood Reporter, Dick Clark Productions, this, you name it. One quick story is a friend of mine was on a call about some transaction with Todd Bollie like years and years ago. And apparently they're talking about this deal and everyone's like, well, what about the growth? What about the strategic positioning, whatever? And apparently Billy just gets on this conference call and goes like, I don't give a fuck about owning this. I only care about making money. Hiten Samtani (30:46) I love the single mindedness. I kind of feel like it's a common thread amongst these moguls and moguls, right? So Bully's there, but he's not the guy who runs point on these real estate bets. The guy who runs point on these real estate bets is a lad called Jonathan Goldstein. Will Krasne (31:00) He runs Cain International, is affiliated with Guggenheim. He was a very prominent real estate solicitor, barrister, think. The solicitor, okay, not the barrister. Okay, they wear the wigs. Hiten Samtani (31:09) That's what they call So he became kind of the go-to CRE lawyer as if, know, Jonathan Mechanic and Jeff Lenoval had a love child in England. That would be Jonathan Goldstein. So he was the go-to guy he was putting together, structuring all these big-time CRE deals. Then he went in-house and worked for a mogul, property mogul called Gerald Ronson. So he goes from being a solicitor to a principal or right-hand man to a principal. Then he does a brief stint at Guggenheim and then he forms Cain International. to kind of do his own deals. And they've become big, man. They're big players now. Will Krasne (31:46) They're doing huge projects in Boston. This one, obviously. Hiten Samtani (31:51) Did you see that they bought the Trump Soho from our boy C.I.M.? Will Krasne (31:54) Yeah, I did. So Beny Olagim, he's got the Beverly Hilton. It's been a success. He's got the parcel next door, gets in with the goog and they build the Waldorf Astoria, which has just epic roof. Absolutely epic roof. Hiten Samtani (32:08) There's a spicy lawsuit that I'll throw into the show notes that the peninsula basically accused them of spying and basically stealing the playbook for guests. It's pretty interesting. Will Krasne (32:17) That's very funny, I love it. So now they decide after two successful projects, they want to triple down. And so they buy this other site on the other side of Beverly Hilton for $445 million in 2018. Hiten Samtani (32:30) They're dreaming no small dreams here, right? This is not just a standard hospitality project. They're going to stitch these together into this one hospitality Mecca, right? You've got the Waldorf, you've got the Beverly Hilton. Will Krasne (32:42) And you've got the Amman. you basically got your like four star, five star and six star or five, six and seven, depending on how you view things. so, OKO led by Ivan Drago's body double. Hiten Samtani (32:56) Vlad Duret comes on. What a character in of himself. He runs the the Amman hospitality empire. He's also a very big player in real estate like super prime real estate in multiple markets, New York, South Florida, etc. Will Krasne (33:09) And so the cap stack here is nuts because they're saying they need what over $5 billion. Hiten Samtani (33:15) $1.25 billion, what are we putting a data center in here? Will Krasne (33:19) God, yeah, right? How many gigawatts is this online going to have? Hiten Samtani (33:22) It's a little bit of a modest project for that cap stack. So we're talking 300 luxury condos, 37 condo hotel units, and an Amman. So I'm struggling to see where that money goes and how it's spent. Will Krasne (33:34) It's like ten million dollars a room of condoms. Hiten Samtani (33:39) One of the Promotes OG readers, Matty G, Matty Gottsteiner, saw the cap stack in the Promote and was like, just for fun, he had one of his analysts crunch the numbers. He's like, I can't make it work. Like, how are they putting these numbers together? How do you get to five billion? We don't know how they're going to spend it, but how are they going to raise it? Will Krasne (33:58) Well, a project like this, it's not like you can walk down the street to your local lender and be like, hello, I would like a $5 billion loan, please. You've got to stitch any public incentives you can get and any public money, debt fund, bank, non-bank, everybody. Like, everyone's got to come to the party. It's got to be a million different people. You got to form a syndicate. You think we need one more? That's really what they did. You think we need one more? All right, we'll get Hiten Samtani (34:25) They've got Vici, which is the casino player. They're providing them with 300 million slug of Mez. I don't know how that happened, but amazing. I love it. Will Krasne (34:33) There go. And then they just got approval from the city council for a special tax district, which is going to let them raise like 550 million in municipal bonds. And I love the press releases and the statements coming out of the city council about this. said they got concessions from cane of 140 million value nebulous as to what they are. Hiten Samtani (34:55) Is it just going to be a Thomas Heatherwick sculpture or something more concrete? Will Krasne (35:00) Yeah, maybe a row down or two. But they say that the money borrowed is going to help fund streets, parks, public infrastructure, but it's all going to be right there. Hiten Samtani (35:08) This is something I think is worth pointing out. Beverly Hills, even though the numbers are massive, is a small town and it's run like a small town. The mayor's kind of all cycle through. If you're in the mix, you kind of know everyone who calls the shots in the city. They have to basically draw blood from every stone possible, right? So they've got this Munibond financing, which is nebulous. And we don't really know the impact of these things until many years later. And sometimes it's too late to really figure out if it was good or bad for the taxpayer. But anyway, they've got that half billion dollar slice. They've got 300 million in Mez from Vici and then they have a while to figure out the rest of it. Will Krasne (35:43) We've laid out a million characters, fascinating folks from all over the place, and we haven't even built it yet. The hardest part is still to come. Hiten Samtani (35:51) quibble with you that I feel like the hardest part is just putting the money together. Once you put the money together you can kind of play around quite a bit. Will Krasne (35:58) That's all that's all you talk, Tessler. Hiten Samtani (36:01) So we have Jonathan Goldstein in the mix, we Vlad Daronin, we have Todd Bolley, like massive massive tycoons. Will Krasne (36:07) What a crew, murderers row. Jim E. was in the face of the project and he's now sort of seems to have receded to the background a little bit. Still says that Algen Capital Partners is a crucial player in this development. But, you know, he's seeing this block that he spent the last 20 years on really come to life in this incredible way. And I'd say a great capstone to his career in Beverly Hills is that as part of the project, Hiten Samtani (36:09) What's up with belly algae? Will Krasne (36:37) the road between the residential towers and LA Country Club will be named Alginway. Hiten Samtani (36:42) That's outstanding. It's absolutely outstanding. Will Krasne (36:45) tremendous. Hiten Samtani (36:52) That's it for the Promote Podcast this week. We'll be back next Wednesday with more CRE Insider goodness. Write us and let us know which segment you like more, Tupac or Biggie. Will Krasne (37:01) Honestly I'm more of a Dr. Dre guy. Please write us a review on Apple or Spotify, a Haiku, a Limerick, doesn't matter, just tell people what you like. Hiten Samtani (37:03) Same here actually, yeah. Big thanks again to our sponsor for this episode, Bullpen. Check out their CRE dedicated recruitment offering at bullpenre.com. And brands, we're CRE's water cooler. If you want to be in the mix with shot callers in this business, hit us up at partnerships at thepromote.com. That's partnerships at thepromote.com. Well, if you had a road named after you, where would that be and what's the vibe? Will Krasne (37:31) It would be the service road leading from the main clubhouse to the golf pro shop at Lifewood Key Club in the Bahamas. Hiten Samtani (37:40) Amazing. think I'm more humble. I just want the alley behind the IFC. That's my job. That would be the some tiny muse of sorts. I'll see you next week, man. Thank you. you. Ciao. Will Krasne (37:47) I love it, that's great. Thank you.