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House of Brookfield, Wholesale Shopping and a Condo Buyout Coup · The Promote Podcast

• Hiten Samtani (00:00) When Daedalus created the labyrinth, it became the shorthand for something so complex and so confusing that anyone who entered would be hopelessly lost. Will Krasne (00:10) It used to be shorthand. Nowadays, you simply say Brookfield. Hiten Samtani (00:14) You Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani. Will Krasne (00:29) and I'm Will Krasne Hiten Samtani (00:32) A shout out to our sponsors for this episode, Bravo Capital, which is one of the markets leading HUD and bridge lenders, really ramping up their deals. Will Krasne (00:38) and LoanBoss, which is a best-in-class CRE debt management software. Hiten Samtani (00:42) This week, we discuss the House of Brookfield's new overlord. Connor Teskey has a modest target, just double AUM to $2 trillion. We talk about the labyrinth that is Brookfield's corporate structure and what CRE's role in the ramp up might be. Then we look at the flurry of retake privates from Peekstone and Plymouth. And finally, we slip into Resort Casual and discuss a princely payoff in West Palm Beach. The Goat Steve Ross makes an appearance. Yeah, exactly right. Should we get started with the punch list? Will Krasne (01:07) not in the position you'd think. Hiten Samtani (01:12) That's what we're calling our signature rundown of the newsiest news in CRE. Will Krasne (01:16) Let's go. can't wait to fight over the punch list, which I always do. ⁓ We got to start with the worst investment. I really laughed when I saw this in the promo. W.U.R.S.T. Hiten Samtani (01:29) Michael Shvo we had talked a few episodes ago about the German pension fund who came in and bet about two billion US dollars on him. Pretty astonishing bet. He went and took that money and went on one of those epic generational buying sprees of the trophiest assets at the frothiest prices. Classic Shvo stuff. Anyway, we now know the size of the loss that BVK is projecting and it's pretty staggering. Will Krasne (01:54) They gave him two billion US dollars and they're going to get back roughly one billion US dollars. Hiten Samtani (01:59) Right now, BVK is projecting losses of at least $1 billion. They've warned that it could be more than that. And I think we knew where this was going to go when we talked about this thing. said, sometimes the returns are the fun you have along the way. But I think the details that just came out in this new Bloomberg story are pretty astonishing. And I wanted to talk about them. Will Krasne (02:17) It's really fantastic. They knew some of the scale of the loss. They were hiding some costs that Shvo was charging the deal. His partners were blindsided. Our friend, Serdar Hiten Samtani (02:27) Yes, there was a Turk that he got in bed with. He was a friend and a partner. I think he actually introduced him to his wife as well at some point. Sirdar claims that he signed about $400 million in PGs related to this flurry of purchases that Shvo made. The reason we're so fascinated by the story is the intersection between a German bureaucratic machine, you know, probably wearing suits out of their version of Walmart or whatever. Aldi. And Michael Shvo, right? That intersection is truly a one of one here. How did this go down? What were some of the of the bureaucratic mismatches here? Will Krasne (03:00) The biggest mismatch is that you have a pension fund which is looking for sort of steady returns and you go to the single most all over the place person in commercial real estate who is a convicted felon. And you do the most high profile zero cash flow hugely capital intensive types of. Hiten Samtani (03:10) tax fraud. yeah. Roundup condo development in top tier markets basically is part of it. Will Krasne (03:21) or buying the Raleigh Hotel, spending a gazillion dollars on the Transamerica Tower to lease 4,000 square feet at your target rent, those types of things. And of course, anyone could have seen this coming, but was Michael Shvo taking private jets back and forth to all these assets across the country? Of course he was. Was he paying for it? Absolutely not. Were the Germans? Yes. ⁓ Hiten Samtani (03:42) The structure of decision making is part of what he was able to exploit here, right? There's an amazing anecdote in here. The due diligence was done by a guy in America called Jason Lucas, who ran Deutsche Finanze subsidiary, Deutsche Finanze Amerika. And then Jason would do the DD. He would inform his bosses at Deutsche Finanze Germany, who would then inform BVK and say, hey, we're good to go. Will Krasne (04:05) That's a lot of then and form then. Hiten Samtani (04:07) The way I was thinking about it, it's like the Kitty Genovese effect. Playing that in CRE, it's pretty good. And then there was an amazing nugget. The Germans had kind of a split personality when it came to cost control. On office deals, for example, they were super diligent about costs and wanted to account for every dollar. But then on some other stuff, do you see the thing about Le Lalanne and the sheep? Will Krasne (04:27) He's famous for the sheep. He brought the sheep to the fucking Getty gas station on the West Side Highway, know. He did. Ten years ago. So they should have known that the sheep were part of the deal. Hiten Samtani (04:36) The sheep were part of the deal, here, Shvo convinced BVK to pay for him to build a custom garden to house the sheep at the rally. Will Krasne (04:46) a little bit of Pennywise pound foolish. Hiten Samtani (04:47) Schwö maintains that everything's going dandy. We should say there's talk of BVK looking to replace both Schwö and Deutsche Finance, which would make sense. But Schwö says everything's going just fine. You want to read a statement for us? Will Krasne (04:59) We are not privy to the details of BVK's internal accounting practices, but do know the Shvo property's ongoing financial performance cannot accurately be described as anything other than success. That's not even like really grammatically correct. Hiten Samtani (05:16) Alright, next one. Black Diamond Capital, really interesting CMBS trench warfare here. What's going on? Will Krasne (05:24) So this is a mall in West Nyack and it used to appraise for north of about $900 million. And Black Diamond won the deal via credit bid for 175 million. And what's interesting about this is that they bought the debt in October of 2025 and they left the holders of the bonds, which were once rated AAA nursing losses. At that point in October, it was the second time since the Great Recession that... The AAA tranche got hit with losses that has since happened a couple more times with I think a group that we're going to talk about later. it's just an example of like how the might have fallen. And we talk about the stress. This is real distress. ⁓ Buying the Westniak Mall, is super tanker, isn't probably even the right word to describe it. Battleship. You suck my bad. Hiten Samtani (06:10) We're gonna see this happen with the American Dream Mall in New Jersey, all these kind boondoggle malls that are just no one knows what to do with them. Will Krasne (06:19) was in a boondoggle 25 years ago. This was as good an asset as you could own in real estate. And that's what I think is so interesting is because what we're looking at now with data centers and all of the capital pouring in there, like, are these the types of things that seven, eight, nine years from now promote episode 500? Amen. Insha'Allah. We're going to be talking about, wow, Black Diamond Capital bought Blue Owl's loan on the data center in Bumfuck, Texas. Hiten Samtani (06:42) If you own the AAA tranche of bonds, that was supposed to be debt that you could cuddle, right? That was supposed to be safe, secure returns for you. But more and more, as distress has been seeping through the system, we're seeing that that is not necessarily the case. Will Krasne (06:56) Absolutely. These things shift, and they shift faster than you think. And if you are doing things and just underwriting based on, well, this tranche has never been hurt before, or this LTV is safe, like the V can change. Always remember that. The V. Yeah, the V is flungible. If you're low LTV doesn't really mean anything if the V goes down. Hiten Samtani (07:08) He is fungible. Next one, less people think this is just a doomer pod, we like to occasionally highlight some big wins. And Blackstone and Divco West just had a really big one in SF. Will Krasne (07:25) That's about as big as you can get. So Blackstone and DivCo or DivCo West, which also I love. I love all the different naming. I love it. DivCo West is a DivCore capital company. So DivCo West and Blackstone announced that Anthropic, the makers of Claude, our favorite LLM, sponsors, please. They leased the entirety of two buildings on Howard Street in San Francisco. And DivCo and Blackstone own them in a JV. And this is about as good. Hiten Samtani (07:43) it all the time. Will Krasne (07:54) execution as you can get. Hiten Samtani (07:56) Yeah, so April 2025 purchase price was about 111 million, which is 265 a foot in Soma, which is a prime, prime, prime market in SF. And boom, it's already leased. I would assume that we'll see a refi coming up. What do you think the game is right after this? Will Krasne (08:12) It depends because we don't know what the lease rate is. We can assume it's very high. We don't know what the TI work is. We can also assume that's very high. And we don't know what the leasing commissions are, which we can safely assume are pretty high. So my guess is that they probably bought this very relatively low leverage. Bought it vacant so you don't want to carry it too much. But yeah, they're going to be in the market. This is as good a credit as you can get. Anthropic is valued. I don't even know. It probably has increased since I started. Hiten Samtani (08:33) Decadeca Decacorn at some point. Will Krasne (08:35) Yeah, so yeah about as good an execution as you can get they will probably be in the market as you said for a refi or a sale imminently Hiten Samtani (08:44) What is this about nine months from purchase to fully leased out? And again, these are the kind of bets you can make in a city like SF, which is improving rapidly. Difficult West is betting on this market big time in many other ways. They just went into contract for 101 California. Will Krasne (09:00) They bought into it, yeah, they had a big value. Hiten Samtani (09:03) Yeah, $975 million valuation, which is about $770 a foot. So they're pretty big on SF again, which is nice to see. Will Krasne (09:10) Super Bowl going on. was very hilarious to see that the folks who thought SF was a hellscape in California is the worst place in the world show up and realize SF is kind of awesome. ⁓ Hiten Samtani (09:22) Alright, that's the punch list. Right after this, we're headed into the Brookfield labyrinth. Alright, I'm here with Aaron Krovitz from Bravo Capital. Aaron, let's get right to it. What's the story behind this mythical 100 % HUD approval record? Will Krasne (09:42) It's 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 $100 million just like we did in Miami, Brooklyn and Jersey City. Hiten Samtani (09:58) And what's the secret sauce? How do you put it all together? Will Krasne (10:01) 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 (10:11) 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. Will Krasne (10:17) Hit 10, 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 (10:27) and speed means the sponsor can close quick. Thanks Aaron, good to have you on. Will Krasne (10:30) Thanks for 10 and you can find us at bravocapital.com. Hiten Samtani (10:38) Okay, we knew this was coming. When we saw the news, we both rubbed our palms because this is a company we love to talk about for a variety of reasons. Brookfield has a new overlord. It is 30-something year old, Connor Teskey. as two 30-something year olds feel a little inadequate right Will Krasne (10:49) 38. I think Connor Teskey is almost exactly the same age as me, like within a month. Hiten Samtani (10:58) So current Dark Sith Bruce Flat will step into the Brookfield netherworld, which is this fascinating realm we're gonna talk about in a second. And Connor has been the golden child... He's the heir apparent. ...for a long time, and he's formally taking the position now. Which is a little faster than we expected, honestly. Will Krasne (11:13) Bruce is still not that old, because remember Bruce took over in his early 30s. So he's had quite a long run, but he's still a relatively young multi-billionaire. Hiten Samtani (11:22) 23 years at the top, right? Ish. Will Krasne (11:25) Yeah, absolutely. this is also, again, talking about the labyrinth. Brookfield Asset Management has named Connor Teskey the CEO. Yes. Bruce Flatt will remain the CEO of The Parent Brookfield. Hiten Samtani (11:38) Yes. In some cases, that doesn't necessarily mean very much, but Brookfield has one of the most bizarre corporate structures, not just in real estate, but I think in all corporate America, you'd say. Will Krasne (11:48) It's kind of crazy. The origin story of Brookfield is fascinating. Rose like a phoenix from the ashes of the Reichmann family. So Brookfield Place, of course, was built by the Reichmann family. Hiten Samtani (12:00) as World Financial Center, I believe. Will Krasne (12:02) The story behind it is incredible because they had to fill in, it used to be part of the river. Hiten Samtani (12:06) You got to give a shout out here to the book, The Reichmanns by I believe it's Anthony Bianco. It's a great, fantastic book. We'll drop it in the show notes. Incredible, incredible. Will always likes to show me up. I've only read one of them, but obviously he's read both. This is how he is. Will Krasne (12:10) Yeah, Anthony Bianca's book. Tours of debt is also fantastic. Yeah, you got to read both part of what's so interesting and again This is a quick aside here about the Reichman's Everyone bid on this site because the city owned it and they put out an RFP who wants to develop it Everyone's worried about price. The story is that the Reichman's came in and they just go So if we were to personally guarantee the debt For however many years, but that'd be interesting to you and they're like, yes, that's what we're looking for because you can default on a purchase Hiten Samtani (12:47) There's a mantra that's come out of this whole wreckage, which is never go full Reichman. Like you never want to cross collateralize and PG the hell out of everything. It can go very well until it doesn't. Will Krasne (12:57) So the Brookfield structure is very convoluted, but it's really the brainchild of this guy, Jack Cockwell. used to run- Legend. The Edper conglomerate for the Bronfen family. owned Universal at one point. Tried to get into media. Edgar, who's still around, I think made a sort of harebrained bid for Paramount at one point. That structure, they call it pyramiding, where it was like you had these interlocking companies that each owned shares of each other, and that allowed you to basically get infinite leverage. It's like the- Hiten Samtani (13:06) Yes, the Brahman family of... Will Krasne (13:27) You remember the infinite money glitch on Robin Hood, which is basically just check fraud? was sort of like how I would describe the Ed Perkins alarm. Hiten Samtani (13:34) the Silicon Valley titans have these super shares in companies like Mark Zuckerberg, et cetera, right? They have a 10 to one voting share situation. That's kind of what Brookfield had for a very long time with this board of governors. Now, the problem was we didn't know necessarily who was in that mix for a very long time until 2020, where they simplified it just a little bit and to turn it into a group of seven, like the Canadian Masters. They have a group of seven, Bruce Flatt's part of that mix overseeing the corporate parent of Brookfield. Will Krasne (14:03) And there's sort of like this Partners Fund that has the Super Voting Shares, which we know some of the people involved don't know all of them, don't know the structure. It's all nebulous. Bruce Flack could be worth like $30 billion. We have no idea. Hiten Samtani (14:17) The other thing that's important here is that this DNA of translucence permeates into their deal making as well in real estate, Will Krasne (14:25) Brookfield affiliates are buying and selling buildings to themselves all the time, like different funds, different drop down. Hiten Samtani (14:32) the GGP mark to market for sick stuff. Will Krasne (14:35) of course. GGP is interesting too, because there's another guy who had been no inside baseball here, but just looking from the outside, who had been seen as really the golden child prior to Connor, who's Ben Brown, who I think still runs US real estate. But he had been the Wunderkind for a while. He was running back and forth from Carroll Gardens to the office every day in a profile. And I think he spearheaded the GGP deal, which has been, despite their internal marks, I don't think very successful. Connor Teskey, the deal I think that really put him on the map was buying Oak Tree and the credit asset manager. Hiten Samtani (15:10) He's a devoted Marxist. Will Krasne (15:13) He is indeed. And I will say this, there's an anonymous Twitter account run by someone who I think may be a podcast host in his spare time, who about eight months before Brookfield bought Oak Tree said, Brookfield should buy Oak Tree on Twitter. so that deal really worked out. so whenever you're this vertical, I call it like you go vertical in a career, it's again, it's about talent, right? But it's also about timing and right place, right time. Hiten Samtani (15:42) You need to have a couple of Hall of Fame things under your belt. At this level of the game, it's not enough to just be an exceptional performer, show up all the time, be super consistent. You need to have something that gets you the buzz within the walls or within the labyrinth, so to speak. You also need to have something that gives you a higher profile in the media, et cetera. So think of John Gray's Hilton LPO, right? Similar kind of thing. Will Krasne (16:07) You also have to make sure that the right deals happen at the right time. A lot of real estate leaders in particular, they're just in different vintages and they're always like a cycle and age apart. Because if you're just like in the wrong cycle, there's nothing really you can do. Hiten Samtani (16:20) What you mean is like you'll have a 50 year old and then you'll have a 36 year old because everyone else in the 40s just couldn't the timing the market didn't work. Will Krasne (16:27) When I first joined Carlisle, I remember looking around and being like, there are a lot of managing directors and directors and there's a lot of senior associates and there are no VP. And I'm like, what happened to those guys? And he's like, oh, they all got laid off in 2008. Oh, yeah, fair enough. When you become a trigger puller, you're really beholden the timing too, because if you come up in 2022, 2023, and those are your first deals, like you could be the best investor in the world and outperform relatively, but they're not great. Hiten Samtani (16:53) Imagine if you ran multifamily starting in 2021, you're toast, or you're at least rallying Will Krasne (16:58) Like I said, his timing. So there's really talented guys at Brookfield. I'm sure Connor, I've never met him, don't know him. I'm sure he's as good as they get, but like there are other great people. If this had been happening, if Bruce had been five years older, 10 years older, Ben Brown would have been the guy, probably. either die a hero or you live long enough to become the villain with G.G.P. Hiten Samtani (17:17) I don't think it's just talent here with Connor Teskey. He's also got some other very interesting qualities. It was an FT or a Bloomberg piece I read. He's also imitated his mentor's speaking style, which is described as, quote, persuasive humility. What do think that sounds like? Will Krasne (17:20) No, it's a politician. It's just, I'm not sure. It's not really in my talents to understand. But you know, I think if I were to guess, I would say that it sounds something like that. Hiten Samtani (17:45) You So Brookfield has been on a fundraising tear. Will Krasne (17:52) I'm glad that you said it's a fundraising terror and not a performance terror because it is very certainly not that. Last thing I want to say too about just timing and how all these things work is that, you know, Bruce, once you're the chair of Brookfield, there's only one place left to go. Hiten Samtani (18:12) I'm the minister of Canada. I actually never figured out if Carney ran all of Brookfield or just part of it. Will Krasne (18:21) I think he was there to look handsome and give great speed. Hiten Samtani (18:25) As a Canadian head of state, there isn't really much else to the job. Sorry, Megan. Sorry. Will Krasne (18:30) My Canadian wife. Hiten Samtani (18:34) Before we get into the performance on CRE, we got to say BAM, as a fundraising machine is one of the best out there. They raised $112 billion in the past 12 months. As we've talked about a bunch on this podcast, the biggest players are vacuuming up more and more of the AUM. That's just the game right now. Will Krasne (18:51) It is. There was an article about the zombie PE firms that came out last week and some, there's real names on there. Some of those guys are just, might be toast. Test. If your performance hasn't been good, like, especially if you've had more than one below par fund in the last, however many vintages, you might just be hung. No one got fired by an IBM. No one gets fired allocating a Brookfield that's not right or wrong. You might argue it's wrong if you're looking at performance, but they have just built. such a machine, it's so big. Blackstone talks about trying to become the one-stop shop. store, this is kind of the same thing. Hiten Samtani (19:28) Let's talk about CRE performance a little bit. It has been stellar from Brookfield on many fronts. We've talked a bunch about the downtown LA debacles they've had. They just sold a tower in Chicago to my guy Sky Dell at 601 West for an 87 % haircut. So think they bought it at $286 million. They just sold it for $41 million. Will Krasne (19:48) scale is sort of the direct enemy of returns and they're so big like they have to do everything. They are the market. They are in everything. They can't just avoid office. They can't just avoid retail. They can't just avoid any of these things. They have to be in everything. You're buying the beta essentially by investing with them. so whenever the beta is, whoa, like you're getting that, they've had all of these office debacles. you know, we were sort of joking that like Brookfield Hiten Samtani (20:10) It's kind of inconsequential, you know? Will Krasne (20:15) But Brookfield, they've heard the three worst words in office investing, was cash and refi. yeah. And they had the biggest one I think I've ever seen. Hiten Samtani (20:23) $173 million has got to be a record. Will Krasne (20:26) a staggering cash in refi. Hiten Samtani (20:28) This is on Liberty Street Tower. That's true. We should talk a little bit about the succession of these megacorps. think the one that's been the cleanest line for a long time is Blackstone with Johnny Gray sitting in that seat. It's very clear who's in that seat. Everyone kind of just below him has been shuffled a little bit. We've talked about Chad Pike. We've talked about Kathleen McCarthy recently leaving the firm and Nadim taking sole charge. Will Krasne (21:02) Guys who could have been contenders, Tyler and Ritzy leave to start their own shop. Hiten Samtani (21:07) Correct. But Blackstone's pretty clean. KKR has been, to me, little bit dodgy with the co-CEO situation. Just, I don't know how long that can last. Will Krasne (21:15) I mean, it works for Netflix, I guess. These businesses now are so big that like one guy maybe can't run it. Bruce is still around, like KKR, like they're such a big company. Same with Blackstone. mean, John is the CEO and he's also, again, young and capable and he's built the big engine, which is real estate. Hiten Samtani (21:29) You know what? John's not CEO though, right? He's COO. Will Krasne (21:32) wow. I think things have to get split. Like we talked about the private credit, Canary in the coal mine right now, Blue Owl this week. They're talking about Mark Lipschitz and Doug Ostrover maybe getting margin called on their shares because Blue Owl is down 30%. If there's a really a private credit contagion, I think a lot of this stuff goes wrong. Maybe there's some sort of like good-co bad-co or something gets split. And at some point, regulation is going to come for them because this is the banking system. Private credit and these types of companies, Blackstone, KKR. Blue Owl, Apollo, they are the banking system. And so at some point, some enterprising young politician is going to be like, we're going to be regulating KKR credit. Hiten Samtani (22:09) As I said up top, Konertesky has a modest goal of doubling AUM to 2 trillion. If you had to put a lot of money to work, guess where it's going? Credit. Credit and data centers. Will Krasne (22:19) or credit for data centers. To paraphrase T. Boone Pickens, first trillion's the hardest. Hiten Samtani (22:32) So, Will, you violate any dead covenants recently? Will Krasne (22:36) So funny you should ask. I have been in technical default recently. I mean, who among us? Right. But not since Q4. Ooh. And that's not because I paid off the loans, because that's when I started using Loan Boss. Hiten Samtani (22:48) I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that. Will Krasne (22:54) Total waste of time, risky business to boot. Loan Boss runs the entire process for me. One click covenant testing, incredible. Instant cashflow 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 (23:17) They've just got it sorted here for- Will Krasne (23:19) Much better. So thank you, lone boss. Hiten Samtani (23:22) Listeners, check them out at loneboss.com. That's loneboss.com. And tell them the Promote sent you. Will Krasne (23:33) And I sag into where are these companies going to put all their money? All these companies that are able to raise and by all these companies, mean, The answer in lot of cases is retake privates. Hiten Samtani (23:43) yeah, so many of these happening. had Plymouth recently, Peekstone has just been a rush of companies being taken off the public markets and swallowed up by the biggest AMG golfers there are. Will Krasne (23:54) And we have new AUM goblers coming into the scene as well because Macarora, you know, led by the aforementioned chef Mike Hiten Samtani (24:01) fisherman, former Blackstone exec. Will Krasne (24:03) They have taken that one up. Hiten Samtani (24:05) Plymouth was an industrial storage read, right? Will Krasne (24:07) Yes, it was. Peekstone, of course, is an iOS read. It is either shitty parking lots or institutional asset class. We report, you decide. Brookfield's buying that one for $1.2 billion. Blackstone, Divco West, these same guys coming up over again. And then ⁓ &W, who I don't know, but... Who is that? you're an apology. I wasn't really familiar with your game. They bought Alexander & Baldwin, a Hawaii-based retail read for $1.5 billion in December. And there's been other activity. Various residential. The artist formerly known as Matt Cowley. right. Hiten Samtani (24:15) Brookfield's buying that one. Charlie Kushner had been agitating for that company at some point recently. How much stock do you have to have in a company to send one of these letters and it be taken seriously? What's the threshold? Will Krasne (24:51) I mean, John Litt has sort of made a career doing it with John. Yeah, with like not a ton. Rhythm, obviously ballroom. Hiten Samtani (24:54) Aladdin Wait, sorry. On this podcast, we take the names very, very seriously. You mean little known investor rhythm capital. Will Krasne (25:05) Sorry, little known investor, Rhythm Capital, took paramount. Hiten Samtani (25:08) Paramount had been going through this incredible run of conflicts of interest and listeners, if you haven't heard our rendition of the text messages between the former Paramount CEO and his ex-girlfriend, some of our best work I'd say. Will Krasne (25:22) the first part of my epitaph. Hiten Samtani (25:25) So Rhythm took control of what 13 million square feet recently and primarily in SF in Manhattan. Will Krasne (25:30) Everyone was bidding on that. was Vornado, Brookfield, all those guys were in on that. And then other smaller REITs too, like Whitestone Realty Trust, which is a retail REIT, MCB out of Baltimore. They've been trying to take them private for quite some time. Digital Bridge, which wasn't a REIT anymore. think they were a C Corp. SoftBanks buying them. Hiten Samtani (25:33) I saw green I think was in the mix. Softbank is buying them right. What's the broader argument here? Like, how are you getting your investors to sign off on these mega acquisitions? Will Krasne (25:57) Everything is about the narrative, right? And so the narrative is distress. And it's really hard to find distress, especially at scale. You can't really do it on the moldy side. You can't really do it in office unless you're buying these sort of one-off deals. Like you can't build a business around it. But the easiest way to talk about, if not distress, but like buying at a discount is let's go buy something that's trading in the public markets well wide of where it would trade in the private markets. And we can say we're getting a discount. Hiten Samtani (26:20) take the nav you say this is the discount to nav let's go in. Will Krasne (26:23) Yeah. And you're like, we're buying it cheap. It's a good narrative. And you almost have like data to support it because you can say, hey, the implied cap rate for this office read is six, seven, and it trades at a low five or something like that. Hiten Samtani (26:35) Take the holdings of an SL green, let's say you compare that cap rate to a recent purchase in the market of a similar asset. And then you go do that writ large and you build your thesis. Is that right? Will Krasne (26:44) And then you can say, we're also stripping out all of the SG &A because we can run it with five people. Hiten Samtani (26:48) and the incredible compensation packages too, I guess. Will Krasne (26:51) ⁓ Those are gone. So you can run it leaner. And again, the threshold to be public is really high. You need to have 5 billion, 10 billion of assets to really like make it work. Hiten Samtani (27:02) I've been covering this industry for 10 years. And if you go through the earnings calls, not once have I ever heard a REIT CEO say, hey, we're valued fairly in the public markets. Part of the shtick of the earnings calls is like, hey, we're getting a raw deal here. Will Krasne (27:14) What you can also do as part of this to your LPs of your private capital is say, these guys can't optimize the asset level leverage. Just a REIT can't be 70 % levered on a multi-deal, but a private company can. So not only are we going to buy this at discount, we're going to lever it up right-size cap stack across all the portfolio. And that's going to deliver the returns to us. And it's a good story, because everyone gets that. They know roughly where a cap rate is for whatever asset class. And you can just say, hey, it's wide. We're going to cut a bunch of. operating costs on the corporate side and we're going to right size the cap stacks. It's a pretty compelling narrative. And the other thing I would say too is that the debt markets are very, very, very liquid right now. drives everything. So when the ducks are quacking, you got to feed them. Hiten Samtani (28:03) We want to tell you about the Promote Insider that is our new premium tier that's now live and packed with exclusive content. Will Krasne (28:09) Think behind the deals, spotlights on the money behind the money and bonus episodes of this year podcast. Hiten Samtani (28:14) you can go to promote.com slash upgrade to get started. That's the promote.com slash upgrade. And listen, if you're curious about the bizarro industry of residential mortgage. ⁓ The Promote Sister publication, the mortgage scoop, is doing some really, really cool stuff. I learned about this guy, Shant. Did you hear about Shant? Well. Will Krasne (28:33) I ain't Hiten Samtani (28:35) He's like Madonna, just needs a first name, it's amazing. He's close to 40,000 deals, it's madness. Imagine that level of productivity, he's crazy. Anyway, it's a super intriguing market. It has its whole cast of characters, very similar to the Promote in that sense. And if you wanna check it out and you're interested in that world, check out themorgatscoop.com. This next one brings together, think, two of the defining themes in South Florida right now. Condo buyouts and Steve Ross. Great story and another happy story to break up the doom. Will Krasne (29:13) phenomenal. So as we've talked about a couple of times previously, folks have been buying condos and buying enough of them to basically deconvert them and then rebuild. So this has really come up since the Surfside disaster what four years ago where the condo collapsed. It had not been properly maintained. It was horrible. Hiten Samtani (29:31) A really massive tragedy that led to a lot of regulation that has basically made owning a condo pretty unfeasible for lot of owners because the assessments that you need to bring these condos up to the new code has left a lot of owners and many of them old and not very much money in situations where they can no longer afford to keep the condo going. So they're more willing to sell. Developers have seen that as a white space, come in, buy enough condos, take over management of the board and then tear down. build something new and shiny for the next Miami transplant that's coming. Will Krasne (30:04) So a lot of these are on amazing parcels of land, but are 30, 40, 50 years old. And so if you were to completely modernize them, you can make quite a pretty penny. So again, we talked about buying wholesale and selling retail in the previous segment. This is basically that in Florida on the water. So this story is, again, tremendous. The incredibly named Joey Colombo. Hiten Samtani (30:26) ⁓ If you tried to write a script about a Miami condo deal and you went Joey Colombo, someone would say, nah, that's not real. Will Krasne (30:33) No, it's so... So Joey Colombo was looking at an older building in Flagler called Southbridge Condominium. And it's right on the water, phenomenal location, but it was older. so he, as he did it pre-surfside, it's good for him. He's like, you know, maybe at some point somebody's going to want to tear this thing down and build up brand new condos. And like, why don't I try to front run it? Yeah. So he ended up buying 27 units. for about six million bucks in a bunch of tranches over four or five years. And he bought a bunch himself, bought a bunch with partners. But again, you can do the math. These are like $300,000. Hiten Samtani (31:10) Mr. Colombo took quite a bit of risk here, right? Yeah. Problem with condo buyouts, and we've talked a couple episodes ago about the absolute nightmare scenario, but the problem with condo buyouts is that if you do not get enough buyouts to consummate the takeover of the building, you're left with a bunch of shitty condo units. Will Krasne (31:27) Yeah, they don't really cash flows rentals and you can't really finance them because you need to own a certain threshold to do a condo deconversion because Fannie Freddie this is actually a strategy that quite a lot of people have done where you convert from condo to rental and then you can qualify for Fannie Freddie financing you get an apartment cap rate and it really works. So if you don't buy enough though you're sort of a no man's land. Joey, I feel like calling him Joey Bagadonna because we can't do it because he's very successful. But he... bought these units and essentially said he wanted to develop this himself. This is a great piece of property. I want to take control of this over time. He ran into a little bit of an immovable object in 2024. Hiten Samtani (31:59) Is this like fairly low? and movable object and an unstoppable force by the name of Steve Ross. Will Krasne (32:08) So Steve Ross bought 10 units in 2024 and Joey being the enterprising young man that he is. Hiten Samtani (32:14) We should just set up the... Ross, as we've talked about, has kind of decamped from New York, where he built his name and his fortune and gone all in on South Florida, specifically West Palm Beach. He is shaping it and bending it to his own will. Incredible kind of job of solo-GP-ing this whole thing off his own balance sheet, I believe, right? Will Krasne (32:33) Yeah, he's doing this off his own balance sheet. Hiten Samtani (32:36) It's like no investors, all the know how, all the capital connections and just go build a city from scratch, essentially. Fascinating. We'll put our episode in the show notes about Steve Ross. All right, go. Will Krasne (32:46) Steve buys 10 units in this same condo because again, this is a good idea. finding the good real estate or finding the good idea isn't the hard part. The hard part is executing it. Our guy Joey did that in spades. He also had the wherewithal to realize if Steve Ross wants something, he's going to get it. But this is a unique situation because he has a ton of leverage. He owns a big chunk of this condo association. So Steve wants to go through him. He sets his price. So he spent six million bucks buying these 27 units. Hiten Samtani (33:00) It's gonna get it anyway. Will Krasne (33:13) and he just sold all 27 to Related Ross for $25 million. Hiten Samtani (33:21) That's astonishing. We should say something about this. The numbers in absolute terms aren't much, right? We talk a lot on this podcast about billion dollar deals. However, Will has written an amazing piece for the promote about GP economics and what a GP actually takes home. In many cases, you can run hundreds of millions of dollars in AUM. You can go to all these conferences and keynote X and Y. You can do all that, but you actually take home a lot less than Joey Colombo will be taking home on this very trade. Will Krasne (33:22) It's a 4x basically in four or five years. I don't know how much you put up, don't know structural as investors, but regardless, there's quite a lot of promote on not a lot of invested capital. And so good for Joey and his take home here is going to be massive. This is life changing money. Like you don't need to do billion dollar transactions to make life changing money. It's this concept. John McNell's wrote about it and making it in real estate. Great book. Highly recommended to everyone. It is. What sticks to you? A lot is sticking to Joey Colombo here. And it's just really interesting because we've talked about you got to be Brookfield or Blackstone or one of these firms. Hiten Samtani (34:10) good. Will Krasne (34:20) Sure. Or you can just front run and margin call. There are three ways to make a living in this business. Be first, be smarter, or cheat. There's all of these opportunities out there. And so if you're an enterprising young GP, go find stuff like this. It takes a lot of risk. It takes a lot of balls. It takes a lot of execution, a lot of brain damage. But I love this story, as you can tell. I'm really fired up about it. And it's the type of thing that if I lived in Florida, and it's the type of thing I wish I would. Yeah, I would look at and try to find the day Hiten Samtani (34:51) A big chunk of our listeners are solo GPs or working at smaller firms and could see themselves perhaps being a Joey Colombo maybe a little bit easier than they could see themselves finding the exact mix of persuasive humility and giant deal making to be Connor Teskey. This is in every man in a way. Will Krasne (35:08) You only need one, right, to make life-changing money. Those opportunities are everywhere. You just got to be bold enough. And in some cases, stupid enough to go after it. Hiten Samtani (35:17) If you had a couple of interesting notes about what the lever points were here, why can Steve Ross not afford to wait on something like this? Will Krasne (35:23) So Joey in the article is basically saying that these guys are paying for speed and these guys being the condo developers who are going to rebuild these buildings. They're paying for speed and ease because they can't wait four or five years because as soon as and Steve's a little different because it's his money. But if you're a developer and you have LPs and you've got loans. Hiten Samtani (35:39) Our math is just the... it's gone. Will Krasne (35:42) The clock starts ticking. You can't take four years to buy stuff out and then knock it down. It's been a year demolishing it. It's been two years building it you're in it for seven years. You can't do that. You need to go fast. And the math can work in your favor to where you can pay a lot more than the other guy paid and it's worth it to you because you're able to go fast. And so if you can figure out where these guys are going to go, get ahead of it and you can spend the time and you don't have the IRR dollars, then Hiten Samtani (36:06) Do you think Joey Colombo stops here? Does he look for the next one? He could stop here. This is enough money to stop. Will Krasne (36:12) I don't know if you want to take this much risk or negotiations again. He said he did 30 separate negotiations for this thing. The brain damage is often not worth it. Like the first one is always worth it, but doing it again, maybe not. Hopefully he finds a little bit of an easier, less negotiation heavy way to make his next return. But Joey, we are rooting for you here at the Promote. Hiten Samtani (36:35) That's it for the Promote Podcast this week. In Brookfield's race to $2 trillion in AUM, what will Connor Teskey gobble up next? Reets are going the way of dinosaurs, and a whippersnapper made a prescient bet that a goat would show up. We'll see you next week with more CRE insider goodness. Thanks again to our sponsors, Bravo Capital. Check out their lending platform at bravocapital.com. Will Krasne (36:56) and Loan Boss, you can find their debt management platform at loanboss.com. Hiten Samtani (37:01) Well, what kind of Joey Colombo deals have you got going for 2026? Will Krasne (37:05) There's a lot in the hopper, very excited about it. We're in the midst of a paradigm shift just globally. There's a regime change in the stock market. There's a regime change in commercial real estate. And now is the time to be aggressive and make your move. Hiten Samtani (37:18) If will is positive, that's a very good sign. I'll see you next week too. Thank you. Ciao. Will Krasne (37:22) Thank you.