CRE's Sporting Scene & the Pied Piper of Sutton Place

Diligence Before It’s Due

On Friday, we wrote about a pending deal for Nick Weber’s Henderson Park to buy Brookfield’s PGA National Resort in Palm Beach Gardens in a $425M ($1.3M/key) deal. Hendo made a similarly pricey purchase - $705M, or $1M/key – of a Blackstone golf joint in Jan., and I had wondered about the economics of these golf-hospitality projects, which have been soaring in value. Looks like hunger for the product is rabid enough that a seller can make rather unorthodox demands, as we’ve now learned happened here.

Due Diligence (Cont.)

Other finalists in the mix, sources familiar w/ the matter told The Promote, were Barry Sternlicht’s Starwood, PE behemoth TPG and Wheelock Street Capital, run by CRE vets Rick Kleeman & Jonathan Paul. The players were all asked to carry out extensive due diligence in the final round of bids, before Brookfield picked a buyer, and a winner was required to go hard as soon as the deal was awarded. Brookfield would then reimburse the runners-up for their due diligence costs.

Not something you can pull off on a sorry office skyscraper in a decaying CBD – see Brookfield’s struggles in that space here – but if you have a PGA championship course and luxe hotel project in Florida and want certainty of close, you might be able to swing it.

NFL Ruling Could Open CRE Floodgates

Steve Ross has gotta be the fastest-moving octogenarian alive.

At the end of August, the NFL voted to allow private-equity ownership of partial stakes in NFL teams, a landmark ruling expected to attract billions of dollars in fresh capital to the sport. And Ross, who bought half of the Miami Dolphins in ‘08 and took full control the following year, is poised to be the first titan to reap the rewards of that decision: He’s in advanced talks w Ares and Brooklyn Nets owner Joe Tsai to sell them a 13% stake in the franchise that values it at a whopping $8.1B, per Bloomberg - over 7x the $1.1B valuation at which he bought in. This is the kind of scenario minstrels 🎻 sing to billionaires about – you get to cash out significantly, and in Ross’ case likely load up for more CRE deals in South Florida, while still maintaining the cachet (billionaires are a dime a dozen, but only 32 NFL bosses) of owning an NFL franchise and keeping hold of a prodigious tax shield. (Last year, Ross had been in talks to sell a stake to Ken Griffin, but those talks fell apart – this is likely an even better outcome.)

The LA Chargers, Buffalo Bills and Philly Eagles are also scouring for PE money, and to me it’s the CRE implications of the ruling that will be a big story to track in the coming months and years. Whereas owning an NFL team used to be a Gestalt business, PE’s playbook is all about slicing & dicing, and real estate has historically been a big part of that game – I immediately thought of what Eddie Lampert (fantastic read here) did w/ Sears. Pro sports also open up a whole world of tax breaks & public-private financing that PE adores. And partnering w/ someone who knows that game cold – Ross built Hudson Yards – should be a fun ride for Ares and Tsai. 🐬 🐐 I wonder if other owners w/ CRE chops, such as the Rams’ Stan Kroenke, are also thinking of getting into the action. 🐏 

The Mod Squad

The hulking Worldwide Plaza has really been through it. Not only did it lose anchor tenant Cravath earlier this year, but its majority owner is New York REIT Liquidating, and that name tells you what you need to know. The 2.1M sf office tower’s implied valuation fell to $1.2B in January, down from the $1.7B+ valuation that Scott Rechler’s RXR and SL Green bought in at in ‘17. The tower is backed by a $940M sr. loan, which was recently sent to a special servicer, per Bloomberg. RXR and SLG are now in talks to modify the debt on the property, which also has $425M of junior loans on it.

Bonus: Nick Schorsch, the man behind New York REIT, completely ghosted NY real estate after the scandal, but has been busy buying up properties in Newport, RI, per this sit-down.     

Bloodsport: Pied Piper of Sutton Place

Just peeked via the Post that the penthouse at the summit of Sutton Tower just listed for $65M, the priciest pad to hit the market in the area this year. The project, by the mighty Kalikow family’s Gamma Real Estate and JVP Management (1 of our Quiet Kings of Capital) is interesting, but what came before it is what truly gets the juices flowing: PE guy Joseph Beninati envisioned a Foster + Partners designed 950-foot-tall luxe condo project, a caper on which he decided not to partner w/ more experienced developers. It did not work out: Beninati defaulted on his $150M loan (some of which came w/ PGs) from the Kalikows in ‘16, who took over the project and came after Beninati & his partners over the PGs. Beninati's British partners fled the country to Spain, while Beninati declared bankruptcy in Texas and surrendered most of the trappings of wealth (Greenwich manse, German cars) and listed personal assets of under $40K (Tiffany watch, Sig Sauer 357). Before The Promote came to life, I had ventured deep down this fascinating rabbit hole - now you can as well here.

Read: The Pied Piper of Sutton Place  

Quickies

• 📽️ The Lads of Lakewood: How a random Jersey town is in the thick of CRE’s biggest national deals – and controversies

• Singapore’s Prime REIT, KBS land $550M refi for US office portfolio 

• D-Rub tells A-Rod about his grand plan for the Orioles ⚾️ 

• Midwood mania: Maguire’s Marvin Azrak sells home in pricey enclave for $9.5M, buys another nearby for $9.4M (dive deeper into the SY world here)

• There will be 🩸: NYC mayor’s housing plan won’t survive unscathed 

•  RICO Chicos: Brokers allegedly defrauded investors by steering them to deals they already owned 👏 

• SF developer’s allegedly “absurd” move to avoid paying back investors 

Unquotable Quotes