Aby, Baby, Title Hijinks, Alt 🐻 Case for Office & Generation Kill

Hit Me Aby One More Time

Now is the winter of Aby Rosen’s discontent. The silver-maned mogul, one half of RFR, was in the midst of a bruising refinancing of his Seagram Building (2Y extension, pref infusion from JVP - more on that here) when the little matter of his other trophy tower, the Chrysler Building, came to light. RFR had acquired the Art Deco icon in ‘19 for a paltry $150M from Abu Dhabi 🇦🇪 , partnering with 🇦🇹 property mogul René Benko of Signa Holding on the deal. There was a lot of work at hand: A $200M renovation, navigating a prohibitively expensive ground lease with Cooper Union (see here for a complete dealmaking history of the tower), and the matter of attracting top tier-tenants to a building that is more address than destination. But in November, Benko was booted out of Signa as part of an emergency restructuring, and the following month his stake in the Chrysler Building was put up for sale. 

WSJ has a new investigation into Benko and just how theatrically wrong things went at his $30B empire. Read the whole thing – it’s good – but a couple snippets here to get a sense of this special guy. 

He ran into trouble in 2012, convicted of an elaborate scheme in which prosecutors said he commissioned a former Croatian prime minister to push Italian officials including Prime Minister Silvio Berlusconi to help contest a tax bill on Signa-owned Italian properties. 

He met scions of one family fortune after another for dinners over glasses of Château Lynch-Bages, which sells for $200 a bottle, they said. He plopped down a specially made hard-bound book half the size of his desk. Paging through photos of property after property, he would tell stories behind the deals and rattle off detailed numbers from memory, staring into the eyes of his would-be investors for what some said were uncomfortably long periods.  

One name that pops up in the WSJ story as a former Benko JV partner in a dept. store deal is Beny Steinmetz, the Israeli billionaire mining ♦️ tycoon. That name will be familiar to New York real estate insiders: Steinmetz was for long a silent (denied, then substantiated by documents) backer of HFZ Capital Group (If new to HFZ, do yourself a solid and catch up on that company here and here– there’s been a fair bit of activity.)

Skyscrapers aren’t the only headaches for Rosen. He and Kushner Cos. defaulted in the fall on a $180M loan tied to their Dumbo Heights portfolio, and he’s staring down foreclosure at a retail property on Miami’s Lincoln Road. A lender motion reviewed by TRD states that Rosen and his partner Michael Fuchs signed PGs on the loan and are on the hook for $5.3M triggered by the alleged default. 

Dirty Deeds 📄  - Update

More news is trickling in about the fallout from the Boruch Drillman mortgage fraud case as it relates to the two title firms involved (ICYMI start here). On Thursday, one lending source told me they received a communiqué from a major bank declaring that it would not close on any loans where Madison Title or Riverside Abstract were involved. Later, another source sent word that more lenders had put the two firms on their do-not-fly list. This would make sense: Lenders are mimetic institutions; none want to be caught on the wrong side of this. (If you have more, reach out to me confidentially or hit up TRD’s Keith Larsen). Given that Madison and Riverside both have a national presence and are particularly heavy hitters in the New York region, this is going to complicate a good chunk of transactions.

Get Shorty- NYCB

I’m running out of pain metaphors to describe the absolute scenes at key multi lender New York Community Bank, so will instead point you to this must-read thread on what I imagine was a very successful short of the bank predicated on its exposure to the 🗽 rent-stabilized market (Dramatic new example: BentallGreenOak took a 64% 💇 on a sale). As for landlords who see the ‘19 rent reforms as the sole boogeyman, Thypin doesn’t let them off the hook: “This is subprime real estate and always has been,” he writes, “but was being valued by players like NYCB as if it wasn't.” (Extended version/pod via Odd Lots here.) 👇️ 

(Side nugget via the FT: the bank’s risk czar left the bank earlier this year; his LinkedIn page has since been erased 🤷‍♀️ )

Wreck-It Ralph

Rather than a hellscape of abandoned skyscrapers and towers trading for scrap, what if long-term office market tragedy arrives in much milder packaging? That is to say, smaller footprints at lower rates.  

Ralph Lauren’s new renewal at New York’s 650 Madison provides a taste. The fashion giant 👖 is downsizing its space by 100K sf (to 140K from 240K) at the Vornado/OMERS building and is also getting a heavily discounted price ($62 psf compared to $88 currently). Put together, the new deal means the company will slash more than half its rent burden (i.e. landlord’s take) to <$9M, per Fitch via Crain’s. Now play that same dynamic out en masse, and you have big things to worry about, even when individual deals are not as dramatic. And even on pricey “flight to quality” deals, overall space commitments are often smaller than they were on the previous lease. (I grilled Rob Speyer on this dynamic a couple years ago, with mixed results 👇️ )

Asphalt Jungle

A treat for readers: Eric Weatherholtz, a retail developer and top-drawer raconteur, has a wonderful newsletter, “Asphalt Jungle,” where he shares tales from the real estate trenches. Today, readers of The Promote get an advance look at one of his wildest ones *. Read on at your peril…

Hard to Say

Andy is a money manager and a happy bear hug of a guy. He loves 🇺🇸 , being a dad, and his black Lab, Sam. If you’re a friend and he hasn’t seen you in a while, he’ll grab you by the shoulders, pull you in close, and ask if you’re ok. He regrets never having served, but after a chance meeting with a combat veteran, he found an outlet for his patriotism - helping former special forces folks ease their way back into polite society.

Dylan is a grizzled former Navy SEAL, with sharp elbows and no filter. Sometimes he stares too long. He’s feral, but that’s where Andy comes in.

I met Dylan for the first time at Andy’s holiday party. He’d been charged with picking up an older guy who no longer drives, a Navy vet we call Captain {“Cap’n.”) Andy figured two military men could get to know each other.

When the pair arrived, I saw Captain make a beeline to the bar, and I went over. “The sonofabitch is nuts”, he said, draining a Jonnie Walker and nodding toward Dylan.

He recounted their trip: as they turned down the two-lane road to Andy’s, a woman passed them, flipping Dylan off, weaving back and forth off the shoulder. Dylan said nothing but gunned his pickup until he was on her driver’s side bumper. Then he floored it, forcing her to spin out into the ditch in front of them. As he pulled in behind her, she jumped out of her car staggering and screaming. She threw an empty bottle at Dylan but he spun away, grabbing her from behind and putting her in a sleeper hold until she went to sleep. Dylan reached into her car window, pulled the 🔑 from the ignition and threw them into the roadside weeds.

“She could’ve killed someone,” Dylan said. They drove in silence the rest of the way.

Whenever others learned Dylan’s previous profession, they peppered him with questions. They wanted to live combat vicariously – but without the pesky risk of death.

To their questions, Dylan’s answer was always the same.

“Dude, did you kill anyone?”

“Hard to say”.

“What’s it like to jump out of a helicopter?”

“Hard to say.”

“Were you in on the Bin Laden raid?”

“Hard to say.”

He combined this phrase with an insincere half-smile and the dead eyes of a stripper - making it obvious any additional inquiries were futile.

Dylan warmed up to me after Andy took us on a three-state fly-fishing 🐡 road trip odyssey. On the return trip Dylan invited us to come by his house, one of those suburban mini-mansions with multiple exterior finishes.

When we got close, Dylan instructed Andy to pull over and hopped out with a pair of binoculars and surveyed the house. He gave us the all-clear to proceed.

We came to learn that the home contained not one piece of furniture. And the windows were papered over. One of the corner guest rooms - his room - had two spotting scopes on tripods each looking out windows where the newspaper had been pulled back. On the floor was a sleeping bag (no pillow) and a laptop with other gadgets and wires.

His eyes lit up when he showed us the garage. It was gigantic, with room for three cars, but it housed none. Instead, it was a private armory. The walls were lined with guns of all types and, except for a grid of walking paths, the floor was covered with tactical gear.

Dylan unfolded camp chairs for us and we sat in a circle. Andy broke the silence:

“Dude”.

“What?”

“What is this? What’s going on?”

What was going on, Dylan explained, was “contract work.” He’d get a text on a burner phone with some instructions, a photo or two, and he’d hop a commercial flight - usually to a far-flung country, where he’d take care of business using the tools he kept in here.

The pay was exceptional and the office politics nonexistent. He never met his boss, never had to deal with HR, and attended no meetings. He was paid to an offshore account, no 1099.

The downside was making enemies with unsavory people, and the second-order effects of that.

I realized I was a guest of a jet-setting mercenary charged with targeted population decreases, but the biggest shock was sitting on the folding table next to me: a shopping center aerial photograph.

Beside the photograph, recognizable to the trained eye, was a stack of commercial leases. Flipping through the top one, I saw the lessee was a leading coffee chain, and the property was one of the best shopping centers in the city. I knew it well - it had been on the market just a few months ago; we’d taken a hard look and bowed out when we realized we couldn’t compete with the big-box REITs. It then struck me that I never heard who ended up winning the bid.

“Why do you have this stuff, Dylan?” I asked.

“What.”

“This stuff. What’s up with this stuff?”, I said, pointing to the table.

“Why?”

“Because it’s weird for you to have it.”

“Not if I own it, it isn’t”, he said.

“Wait, what? You bought this? How in the hell were you able to pull that off?”

Dylan raised his head, looked through me, and with a grin, said: “they didn’t fight me on it.”

“What do you mean? How’d that happen?”

“Hard to say.”

(*Names/identifying details changed in the above tale, for obvious reasons)

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