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DOGE Comes at FDIC & Meridian's Health is Wealth

Antitrust but verify, a bank regulatory overhaul, plus: inside the Adlerstein-Simpson saga

Author

Hiten Samtani
December 13, 2024

Trump Advisers: Do We Need the FDIC?

Trump’s DOGE team has been asking about whether the FDIC needs to exist

DOGE 🐕️ is asking questions about whether President-elect Donald Trump could abolish the FDIC, a move that, if it came to fruition, could upend CRE banking as we know it.

In conversations w/ nominees being considered for the FDIC and for the Office of the Comptroller of the Currency, Trump advisers have asked if deposit insurance - which protects customers in the event of a bank failure (i.e. Signature Bank, First Republic) – could be absorbed into Treasury, WSJ reports.

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FDIC (Cont.)

Bankers have been looking forward to a light-touch regulation era under a Trump administration, particularly on matters such as capital cushions & consolidation. But FDIC deposit insurance has long been sacrosanct 🐄 , given the universal belief in its importance to the stability of the banking system, and neither GOP nor Democratic administrations have tried to mess with it. Killing the FDIC would require an Act of Congress. The Trump advisers have also discussed combining/restructuring the 3 main federal bank regulators: FDIC, the OCC and the Fed, according to WSJ. Candidates for bank regulator roles have interviewed w/ Scott Bessent, Trump’s pick for Treasury Secretary, as well as DOGE, the outside govt. efficiency advisory group chaired by Elon Musk & Vivek Ramaswamy. Musk has also called for the end of the CFPB, saying last month that “there are too many duplicative regulatory agencies.”

How will banks feel about this regulatory smushing? “They like the status quo,” former FDIC chair Sheila Bair told the publication. “They like to have their own regulator they have a relationship with.” Frank Sorrentino III, CEO of ConnectOne Bank, added that the system benefits from multiple regulators that have a sense of the “size, complexity and future challenges” of different lenders. 🗄️ 

Bonus: For more CRE-specific regulatory chatter, check out our conversations w/ a federal bank examiner from earlier this year– Pt. I, Pt. II and Pt. III (real-time look into a CRE loan book review!)

Meridian: Health is Wealth

Meridian’s healthcare rainmakers Ari Adlerstein & Josh Simpson were terminated Wed.

“If you're in my unit, you gotta be in it all the way or not at all. I thought that you was man enough to face that. I guess I was wrong.” - Alonzo Harris, Training Day

Healthcare real estate is a byzantine world within a world, ruled by a small cast of characters who trade & operate billions worth of real estate in near-total obscurity. Brokering in that world is a delicate balancing act between regulation & relationships - you need both an understanding of the arcana of Medicare/Medicaid ❤️‍🩹 and the ability to hold court at Tabernacle. In recent years, two of the dealmakers to dominate that niche are Ari Adlerstein & Josh Simpson, co-heads of the practice at Meridian Capital Group – at Meridian, that is, until this week, when both were fired for cause.

Sources familiar w/ the firm confirmed that they were terminated Wednesday, w/ immediate effect. In a statement, Meridian said that it has “had a terrific 2024 brokering tens of billions of dollars in deals and is well positioned for the new year, including our healthcare group which closed more than $1B in transactions in the first half of this year alone. Our talented team of brokers, led by rainmakers like our co-founder Ralph Herzka, is unmatched in the industry and they are poised to make 2025 an even better year.”

There’s a lot to chew on here. First, Adlerstein & Simpson led a team that averaged $5-6B in deals annually (that’s arguably bigger than the Morris Betesh team that recently bounced), according to insiders and published announcements. Back-of-the-napkin that at 50 bps, and you’re talking about $30M-ish in annual revenue for Meridian – as of now at least, their 13 team members are staying put. Adlerstein was a 13-year vet of the firm, and co-founded the sr.housing/healthcare practice w/ Ari Dobkin, who left in ‘22 – that year, the Adlerstein-Simpson group topped MBA’s ranking in the space. The timing of the termination is curious – Adlerstein & Simpson had been negotiating an exit for months, sources told The Promote, and had even had discussions to create some sort of external vehicle backed by Meridian ownership. But the end, when it came, was dramatic – internet cut off and all that jazz.

Adlerstein & Simpson did not respond to requests for comment. When brokers are fired for cause, it puts a big ? on year-end bonuses and commission payouts, so it’s fair to expect some litigation fireworks here. No word on what they have planned next, though given the riches in this particular niche, their own shop would make sense. 👩‍⚕️

Antitrust But Verify

Anant Yardi of Yardi Systems & RealPage’s Dana Jones

Mentioned Wednesday that Yardi has to face the music on a price-fixing lawsuit, after a federal judge ruled in a way that gave a major boost to the DoJ’s per-se interpretation of antitrust – catch up here, docket here, and Yardi’s unsuccessful motion to dismiss here. Yardi spox said: “There is nothing illegal about Yardi’s revenue management product, and the allegations against the company are simply false.”

Meanwhile, wanted to give you a sense of what landlords mired in the DoJ mess related to Yardi’s chief rival RealPage are thinking, based on conversations I’ve had. Though the DoJ dropped its criminal investigation last week, it is still looking into civil lawsuits. Initially, the DoJ was making far-reaching requests related to landlords’ use of any private rent data; it has since shifted the focus of negotiations specifically to rent-setting, pushing for a move away from pvt. data and more into publicly available data sources. Given the ticking clock for the current DoJ, it’s striving to find some middle ground w/ landlords – i.e. face-saving for the agency, and the end to federal heat for landlords. 🔥 🧯 

Brookfield’s Student Housing Splash

Two biggies worth quickly noting in the student-housing space: Brookfield bought an 8,700-bed, 14-property portfolio of student housing for $893M ($102K/bed), per Bloomberg. The properties cater to schools such as Texas A&M, Dartmouth & IU. The deal seemed familiar, and indeed, it looks to be the very same one that Rob Bronstein’s Scion Group brought from Harrison Street last month – i.e. Brookfield is the “unnamed institutional investor” that backed Scion; Bloomberg’s story made no mention of Scion.

Meanwhile, Bahraini firm Investcorp paid $300M for nearly 3K beds serving schools in Texas, Kentucky and Oklahoma. 👩‍🎓 

Quickies

Unquotable Quotes

“Additional proof of the success we’ve had at elevating this office property.” 🧑‍🎓 
- AmTrust’s Jonathan Bennett, celebrating small – as in 4,000-square-foot office lease small – wins.