Aby's Korean Drama & Sotheby's CRE Playbook

Aby’s Korean Drama

The Koreans are out of patience, and Aby Rosen’s out of time. Debt funds managed by Daol Asset Management are moving to wrest 285 Madison from Rosen’s RFR after a drawn-out battle to get paid back on their mezz. This is a confrontation of the sort you rarely see when it comes to Korean lenders, so it’s being closely followed.

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Koreans (Cont.)

In Oct., Daol had won a marquee legal battle against RFR, with the courts ruling that Rosen & Michael Fuchs had to personally pay up $18M to satisfy their PGs on their mezz. Daol had insisted on the PG clause when RFR had sought an extension on the $205M debt in late ‘22, a maneuver uncharacteristic of Korean lenders, who’ve historically been a piñata for sponsors when deals go bad. Now, Daol has exercised the nuclear option, initiating a UCC foreclosure auction (via Matthew Mannion of Flatiron Building fame 😍 ) set for 4/15, according to Newmark marketing materials seen by The Promote. The lender is also shopping the note, hoping to fetch $300M+ for it, per TRD. The change in strategy here happened after Daol replaced its former adviser BridgeRock at the beginning of the year, sources said. The new adviser, Ocean West, pushed for this approach.

That’s not even the end of RFR’s travails at the 26-story, 500K sf tower: CMBS bondholders are also gunning to foreclose on the property after RFR defaulted on their $220M-ish loan; RFR had sought to refi that debt, but angry mezz can of course complicate matters.

RFR declined to comment. It’s been a rough winter for the frou-frou firm, which just lost the Chrysler Building and is being pursued w/ vengeance by lenders across town – most notably Rialto.

MF Landlords: Rev Up for Higher Rents

What, in its stripped-of-emotion essence, is the multifamily business? It’s a way to generate a sufficient return at scale for your institutional investors, while earning a nice promote and fees for yourself. That’s it – that’s the game. Being good at it means delivering those returns while navigating a thicket of uncertainty & risk: regulatory, construction, operational & capital markets. You take all that, put it together w/ demand, and you have a formula for rents.

Lee Everett, head of research & strategy at Cortland, is one of those multifamily lasagna guys, a real G moving in silence. His field perspective – a refreshing antidote to those tariff charlatans popping up all over – is worth paying attention to, and in his latest chat w/ Bloomberg’s Odd Lots, he makes a compelling case that we’re entering an era of rent growth in good locations.

He cites the following to make his case

• Interest-rate spike that kneecapped new supply 🏏 🧎 

• Soaring insurance costs: Sunbelt’s Tornado Alley, CA wildfires, FL hurricanes ⛈️ 🐊 🌪️ 

• Big ? on construction undocumented labor w/ POTUS deportation warnings

• Surge of high-income earners who all want to be in the right spots
  
  “You're seeing an exceptionally high quality credit worthy tenant and you're seeing huge demand for that housing,” Everett says. “And that's because nobody's building in the well-located areas.” Check out the full convo, w/ valuable nuggets on multifamily M&A, policy & financing, here.

Sotheby’s: We’re a Real Estate Business Now

Auction-house Sotheby’s has been on a financial restructuring odyssey over the past year, shoring up its balance sheet through a $1B deal w/ an Emirati SWF while it navigates plummeting sales in a weaker global art market 🖼️ . So what’s it now choosing to play up? Real estate, of course: via Puck, we learn that Sotheby’s now all about that sweet brick – CFO David Kownator noted in the firm’s latest investor call that it was “expanding into new markets through our real estate strategy. We now own over $1 billion in real estate assets and our prime locations give us a competitive edge.” These properties include Manhattan’s Breuer building, which it bought from the Whitney for $100M-ish in ‘23, as well as its Paris base on rue du Faubourg Saint-Honoré 🥖 Kownator also cited the ‘21 purchase of a majority stake in luxury RE-focused Concierge Auctions. The overall vibe that he & his boss Patrick Drahi wish to convey, per Puck, is that Sotheby’s is now a global luxury retailer – and real estate is core to that new playbook.

The acknowledged master of that particular strategy, of course, is LVMH overlord Bernard Arnault: Fueled by cheap corporate debt, LVMH dropped $2.7B on RE acquisitions in ‘23, and brokers, developers and landowners in primo corridors salivate whenever the name L Catterton is uttered - more on that here.

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Word on the (Green) Street

Fascinating bit of CRE inside ⚾️ here: Centre Square, a hulking 1.8M sf office complex formerly owned by Elie Schwartz’s Nightingale Properties & InterVest, is heading for a sale. The sponsors owe $375M+ on the CMBS debt & the property’s been in receivership since spring ‘23. So far, par for the course when it comes to Schwartzlandia, but here’s the good bit: As court-appointed receiver, CBRE is asking the court to waive the requirement for a “broker provision,” in a bid to maximize institutional eyeballs on the deal. IF the deal requires incremental updates and key deets to be disclosed in court filings, local media may catch wind of it and run stories – such a move, CBRE argues, means that Green Street (publisher of REA) wouldn’t write about it.

“Herein lies the dilemma facing the receiver,” CBRE’s filing states, per the Philly BJ. “If the receiver is required to file a motion to obtain court approval of all brokerage terms including the list price, it is inevitable that a Philadelphia media source will be the first to publish a piece about the imminent sale of the property and the critical and free advertising to 40,000 real estate professionals through Green Street News will be lost.”

If I were Green Street’s publisher, I’d find a way to incorporate this into a marketing campaign. Talk about clout!

See also: Real estate/industry press 101: An insider’s guide  

Quickies

• 🎥 Skyfall, Moshe Silber style: Excess, leverage, fraud and G550s 🛩️ 

• Ivanhoe/HK partner line up $1.1B refi (Wells, BofA, BMO) @ 3 Bryant Park

• Meet Cirrus, the new co-developer (for now) at Pacific Park 🌊

• A forensic dive into Syndicatorland: Lasater, Dombek & the curious case of a Dallas multi NPL 🔍️ (more on Lasater here) 🏎️ 

• He needed this: Shvo close to landing 💼 Morgan Lewis at Transamerica Pyramid (more on Shvo here)

• House of Griffindor: Here’s who’s running point on Citadel’s Miami HQ 

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