Ackman's Brookfield Bromance & Newmark's Life After Lutnick

Big Bill’s Brookfield Bromance

When Bill Ackman was steering what would become one of his best-ever bets, a stake in struggling mall giant GGP, he locked horns w/ Brookfield, with whom he had been working to get GGP out of bankruptcy. Ackman’s Pershing Square, which owned 10% of the firm at the time, was pushing for an outright sale of GGP, while Brookfield, which owned 42%, wanted to continue operating it.

The firm’s conduct, Ackman said in ‘12, was “incredibly upsetting – a bunch of crap.” Ackman didn’t get his way, but made out like a bandit anyway - “we turned $60M into $1.6B,” he later said. He’s now reframed the Brookfield relationship narrative entirely, telling investors in a conference call last week that “it was one of the most satisfying and successful experiences I’ve had working with another management team.” 💑 

Hedgie sweet nothings usually come w/ a financial play, and that’s the case here: Since April, Pershing Square has amassed a $2.6B stake (2.2%) in Brookfield, it disclosed, making it the firm’s 2nd-largest position.

Brookfield (Cont.)

Ackman is betting, per the Globe and Mail, that Brookfield subsidiary (navigating its corporate structure is a trip) BAM’s fee-related earnings will nearly 2x by ‘28 and that Brookfield has a lot of room to run, particularly in terms of getting more love from US institutional investors – inclusion in the S&P 500 for starters. His benchmarks: KKR & Apollo.

CRE, of course, is a big part of Brookfield overlord Bruce Flatt’s masterplan to more than double the firm’s total AUM to $2T by ‘28. The firm is making heavy investments on both the debt & equity sides: this month, it paid Blackstone’s BREIT $845M for 4K+ multi units in Vegas, Phoenix and the Carolinas, per CoStar. And it was just revealed by CMA as the $800M+ buyer of Valley National Bank’s performing CRE portfolio, which it bought at just a 1% discount, following a splashy (and deeply discounted) deal for Veritas’ distressed debt on a 2K-unit SF multi portfolio last year.

Mayweather – Again!

This is the maddest dealmaking flurry I’ve seen in a while… who does Floyd Mayweather think he is, Nick Schorsch? The boxing legend’s putting $100M ($20M already wired 👏 )into a new vehicle w/ Meyer Orbach & Josh Gotlib (Black Spruce) that’s part of a $3B JV, per TRD. Mayweather’s Vada Properties is taking a stake in Murray Hill’s American Copper Buildings, which Black Spruce bought from JDS/Baupost in ‘21 for $850M, as well as the Solow resi portfolio, which Black Spruce/Orbach bought for $1.8B in ‘22.

“Meyer and Josh are two of the smartest investors I have ever met,” Mayweather said in a statement to the publication (betting he’ll be speaking at TRD’s next showcase), while Orbach said that “whatever the opportunities are, we’re going to do them together.” This deal follows Mayweather’s $400M purchase of an AH portfolio in Upper Manhattan from Black Spruce in October, and an intriguing bet on 601W’s office portfolio this month.

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Distress is a State of Mind

A new Newmark industrial report has a slap-you-in-the-face chart (h/t Josh Pollock) on maturing securitized debt broken down by asset class. Under the ominous title, “Some Loans Will be Able to Absorb Higher Interest Costs – Many Will Not,” it flags 46% of securitized MF loans ($47.3B) as insolvent (DSCR <1). Only 21% of such multi debt falls into what Newmark defines as “lower risk,” w/ DSCRs > 2 – of course, one firm’s definition of “risk” may not be shared by the market. The strained debt, much of it floating-rate CRE CLOs, is not just the domain of debt funds (see “Multi Lenders Silent Scream”) - “the securitized markets are not an isolated problem,” Newmark writes; “banks engaged in a great deal of this newly risky lending.”

OZ Champion Gets Top HUD Gig

Political junkies expected a Ben Carson comeback or even homebuilding scion Bill Pulte (special Twitter account). Instead, for his HUD secretary, Trump nominated Scott Turner, delighting CRE players interested in the upsizing of a favorite federal tax incentive program: Opportunity Zones

Turner, a former NFL player 🏈 and Texas state rep., briefly served in Trump’s first term as head of the White House Opportunity and Revitalization Council, which helped coordinate federal resources in OZs. Trump’s announcement highlighted that work, crediting Turner w/ helping drive $50B+ in private investment to OZs. As of ‘22, the OZ program had spurred $80B+ of investment, per the Joint Committee on Taxation. As of this Sept., OZ funds had raised nearly $40B, per Novogradac data cited by Bloomberg, but investment started to taper off late last year.

The OZ tax break is set to sunset in ‘26, but Turner’s appointment is a strong sign that not only will it be extended, it’ll likely be expanded. Some boosters have been pushing for it to allow “feeder funds,” i.e. allowing one OZ fund to invest in others (The Promote has done a deep dive on how that works in MF syndication – issues about transparency/alignment of interest worth considering). For its part, Novogradac (an accounting firm deep in the OZ mix) suggests adding reporting & transparency requirements, but also further incentives for “impact investments” and an upsized tax break of up to 100% of the original investment.

“The OZ incentive is a relatively shallow incentive that on its own, may not be sufficient to persuade private capital to invest,” Novogradac partner Jason Watkins wrote in an Oct. letter to lawmakers.

Newmark’s Life After Lutnick

“There are leaders with juice, and leaders without juice,” The Promote wrote this June. “Newmark CEO Barry Gosin is very juicy right now. He has the full faith of his chairman, Howard Lutnick, who’s pushing him to pillage the talented halls of CBRE, Cushman and JLL (and maybe sometimes Avison Young & Marcus), even if that means spending big to do it.” 🧃 

Gosin’s boss & biggest booster is now heading to the White House as Commerce Secretary, and announced last week that he would divest his interest in Newmark. “I have full confidence in the leadership of Barry Gosin,” Lutnick said in a statement. Gosin’s contract runs through ‘26, w/ a guaranteed annual comp of $17.5M and a lot of leeway for RE investing side-quests. He’s been at the helm of the firm forever, back when it was owned by Jeff Gural, and ran point on the ‘11 merger w/ Lutnick’s BGC Partners. In the last couple years, he’s taken Newmark to the top of the office I-sales charts & invested heavily in its debt platform.

As of this summer, Lutnick held just 11% of the stock, but remember that he has Zuck-esque 10:1 voting shares that give him 56% of the voting power. He doesn’t plan to sell any shares on the open market, so we’ll see how the ownership shuffle works out behind closed doors, and what it means for Gosin & the firm.

Quickies

• Business cards as CRE time capsules 🃏 

• Aby defaults again at 285 Madison, this time on sr. loan (read more about his PG problems here) 🫃 

• GD Holdings (affiliated w/ Mexican conglomerate Grupo Denim*) pays $117M for bulk condos at Chicago’s St. Regis

• 🎧️ Creditor-on-creditor violence: A rundown 

• CBRE approves $5B stock buyback 

• How Invesco’s mortgage REIT uses the mothership to juice NAVs 🛸 🧃 
  
  Correction: An earlier version of Quickies misID’d GD Holdings 

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